Turkey
Just when we're trying to figure out the Jobless claims versus the Extended claims and which one is going to be more reliable when forecasting NFP the DOL tells us that last week's jobless claims fell to 466k! Excluding any discussion over the Extended benefits and survey error for a moment this tells me that NFP is about to improve to -62k for November and sets us up for job creation in 2010. This would break a string of 2 consecutive years of job losses in the US.
That 466k figure appears to be legit as only California cited the Veterans Day holiday as impacting jobs. Every other state cited fewer layoffs, but no state cited improved hiring so can we really get excited?
Our friends from High Frequency Economics sent us the history of Extended jobless claims benefits and we charted them below vs. the initial jobless claims:
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The chart clearly shows that we've seen spikes in Initial Jobless Claims before, basically during every recession, but we've never seen a spike in Extended benefits such as the spike that we are seeing right now. We confirmed that Jobless claims only reflect new claims of unemployment and Extended benefits are for those that have been claiming all along but are no longer part of the Jobless Claims total, fyi.
The important question is what is NFP going to be as we've never seen Extended benefits like this? As mentioned I think that it'll reflect the improved jobless claims figures but the unemployment rate is going to reflect the Extended benefits and move towards 12% in rapid fashion. The unemployment rate does lag as the chart below left shows:
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Of course we could be wrong and NFP will disappoint but we'll find out soon enough. Just more economic data to debate which may be why so many traders prefer technicals to build models based on trend and momentum and/or quants to build models based on price. Building a fundamental model can be done, but it would have been difficult digging up economic data that would have had you invested in stocks and the Euro this year. For example the ECB releases their M3 data on Thursday and right now there is No demand for money in Europe:
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The last time that demand was this low for money in Europe was back in 1997 and Gold was about to take off, but we talked about that yesterday.
We can't forget the Japanese data and my preferred is the Household spending. It spikes at Christmas and the Lunar New Year and this will be reflected again on Thursday.
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Remember back in 2006 when EURUSD finally broke 1.30 on Thanksgiving and was trading at 1.35 by the time that the US was back at full-staff on the trading desks. No doubt that today rings a touch of deja vu.
There are two differences between now and then:
1) The price levels, 1.30 vs.. 1.50 - the ECB is more attune to 1.50 and what lies ahead than 1.30
2) We had been trying to break 1.30 since that August and finally did so when the US took a holiday. This time around it's only been a WIP for a month
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