One of the major divergences in data recently has been between the SA initial claims and NSA initial claims. According the government's doctored SA number, initial claims have fallen off a cliff, signaling a pick up in the job market. The number of new initial claims has declined from 438,000 to 388,000 in just 5 weeks. Generally, a sustained drop below 400,000 has been consistent with a recovery in the economy, which, of course, means further gains in the stock market. Some in the blogosphere have questioned the validity of these numbers noting that while the SA number has improved, the NSA number has surged from 413,000 to over 521,000. So who is correct?
Let's take a look at a chart which plots initial jobless claims on both a SA and NSA basis.
You can clearly see from the chart above that the NSA data is much more erratic than the seasonally adjusted data. But you will note that the large divergences seem to follow a pattern towards the end of the year and quickly fall back into line. Based on the chart, it looks like the pick up in the job market is for real despite the consensus for another sluggish year for employment. It is hard to say what in particular is the catalyst for the dramatic improvement. The only real thing that comes to mind is Zimbabwe Ben's signature brand of kool-aid, which has gotten everyone back into the Goldilocks stupor that the market can never decline, despite Europe being on the verge of collapse. Once the Fed induced liquidity party is over, there is going to be one hell of a hangover. That is why the Fed will almost certainly never again implement positive real interest rates--it would ruin the party of dollar debasement and speculative bubbles, which according to our Beloved Chairman boosts the "wealth effect" and helps keep the ponzi economy going.
Black Swan Insights