UNEMPLOYMENT CLAIMS

The market reacted strongly to initial unemployment claims jumping from 488,000 to 500,000. But on a not seasonally adjusted basis claims actually fell from 424,504 to 4o1,856. In recent weeks the seasonally adjusted claims have been somewhat distorted because GM did not have its usual seasonal shutdown of plants this year. This was also reflected in the very strong industrial production report. So it would be better to not react so strongly to the rise in initial claims to 500,000. GM operating its plants through the usual summer shutdown does distort the data, but it is also a sign that the economy may not be as weak as people suspect.


I did not report on this yesterday, partially because I had told my paying clients that the market was extremely vulnerable to disappointing economic news so the negative market reaction was in line with what I expected. But Ken suggested I report on this. For example, this was my chart of the month sent to clients a few weeks ago showing that spot inventory problems were emerging in a few sectors like computers, communication equipment, department and hardware stores. Overall, inventories are not a problem, but selected areas are emerging as problem to watch closely.