Jobless claims were 367,000 for the week of January 28, down from a revised 379,000 for the previous week. The four-week average remains in a modestly downward trend, well below the meaningful 400,000 mark.
Today’s report arguably has a bit of a “no news is good news” character to it. While economic data had been trending positively late last year, recent indications suggest that momentum may have stalled out just a bit. The jobs market, however, still appears to be slowly moving in the right direction.
The recent risk-on trade that generated impressive equity returns in January has not been deterred by the Fed’s lack of conviction that a sustainable period of growth has emerged. The market has been volatile for some time and the recent upswing fits that pattern. Nonetheless, investors shouldn’t be lulled into a sense of complacency about the very real downside risk that still exists.
With growth in the fourth quarter not as strong as hoped and the potential for economic weakness outside the U.S. to weigh on growth here as well, the risk of an economic slowdown or downside volatility in stocks in the months ahead shouldn’t be minimized.
The focus will now shift to the January employment report tomorrow, which is expected to again show a moderate pace of job creation. Even with the slow healing for the jobs market, the slow pace of economic growth and uncomfortably high jobless rate still weighs on consumer confidence. With the foreseeable path ahead still seemingly defined by slow growth, a much-desired virtuous cycle of stronger consumption, growth, and job creation remains elusive.
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