Real Jobless Claims Rise Is Coming

By "The Greek"

Weekly Initial Jobless Claims were reported today for the period ending September 8, 2012. Claims surprisingly jumped by 15,000, reaching back upward to 382K. It was a leap from a revised prior week count of 367K, which was hiked up by 2,000 from its initial reporting. It was distressing news on the surface, but perhaps to your surprise, this time I’m quelling concerns. The week’s data was impacted by a nonrecurring event and seasonal influence.

The first factor was even noted in the report itself, as Tropical Storm Isaac apparently drove at least 9,000 individuals to the unemployment line. When a bad storm floods or otherwise damages a building, it oftentimes also disrupts a business operation. Given that unemployment insurance is available, businesses can reduce their expenses as they repair and rebuild. Employees who are laid off are neither left in the breach, but insured.

The second factor was not mentioned in the report but likely plays a role in filings around this time of year. The long Labor Day holiday weekend could have disrupted the flow of new filings in one way or another. Thus, we cannot read too much into data around holidays generally, despite their being adjusted for by the reporting agencies.

The four-week moving average of new claimants increased by 3,250 this week to 375K. The insured unemployment rate measured 2.6% in the period ending September 1, unchanged from the week before. The number of insured unemployed Americans declined by 49,000 during the same week, to 3.28 million. The number of Americans receiving benefits of some sort for their unemployment, including through the extensions program, fell by 78,465, to 5.39 million in the period ending August 25. At this point, I reiterate that it is clear now that a great portion of the people falling off of this count are simply running out of coverage, and then falling off the radar.

Employment services firms are most closely tied to this report and the shares of Robert Half International (NYSE: RHI), Monster Worldwide (NYSE: MWW), Manpower (NYSE: MAN) and Kelly Services (Nasdaq: KELYA) are mostly higher today, but there’s too much noise in the news flow to really say this is why.

Company & Ticker	Today’s Change So Far
Robert Half (NYSE: RHI)	Unchanged
Monster Worldwide (NYSE: MWW)	+1.1%
Manpower (NYSE: MAN)	+1.7%
Kelly Services (Nasdaq: KELYA)	+0.5%

The jobless claims report was quickly overcome by the highly anticipated action of the Federal Reserve’s Federal Open Market Committee (FOMC), and so stocks moved decidedly higher from 12:30 PM EDT. The impact of this negative news would have been questionable anyway, given the nonrecurring drivers. However, over the coming months, I continue to expect this data point to reach above 400K again and to drive stock selling on some Godforsaken Thursday morning.

For this reason, and because of ongoing domestic and global economic deterioration and rising geopolitical impact, once the steam is used up from the central bank driver moving stocks again today, I would gradually move out of equities. The SPDR S&P 500 ETF (NYSE: SPY) is up 1.2% at this hour and 14.6% since June 1st and yet the American and global economies are slowing, and corporate earnings are being reconsidered. This can only last so long. I would gradually reduce holdings in stocks and the SPY, but continue to favor gold.

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