Nothing new: Initial claims "disappointment" shows an economy that's growing but not especially quickly

03/10/2011 7:18 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

The stock market is sold off today on a “disappointing” increase in initial claims for unemployment. (Well, a trade surplus that was actually a trade deficit from China, which raised fears, yet again, that China’s economy was slowing certainly didn’t help stocks, especially commodity stocks.)

First-time claims for unemployment benefits rose to 397,000 for the week ending March 5 from 371,000 for the previous week.  Economists had expected a much more modest increase to 376,000 this week, according to Bloomberg.

Traders, of course, know that the week-to-week swings in the initial claims number are meaningless. But, hey, if you need some volatility to make some trading profits, this data is as good an excuse as any.

Truth is that the week-to-week numbers get distorted by short-term events—this time the most likely distortion is the Presidents Day holiday. Economists—and investors, I hope—watch the more meaningful and less volatile four-week moving average on initial claims. That shows initial claims still below the critical 400,000 level. The moving average for the four-week period that ended in March 5 climbed to 392,000, a tiny increase from 389,000 in the four-week period that ended on February 26. That hardly disrupts the strong trend that has taken the moving average down from 419,000 to 401,000 to 389,000 in the previous weeks.

The most recent initial claims number is consistent with other recent data on the jobs market such as the February drop in the unemployment rate to 8.9% from 9.0%. Below, but not much below, the 400,000 level in new claims is consistent with the creation of 100,000 to 200,000 net new jobs a month. In February 2011 the economy added 192,000 new jobs.

So the initial claims data and the jobs numbers are both giving us a picture of an economy that’s growing solidly but not especially quickly.

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