Is This A Double Dip Signal?

Excerpts from Bloomberg:

Jobless Claims in U.S. Increased 11,000 Last Week (Update2)

By Courtney Schlisserman
Jan. 14 (Bloomberg) -- The average number of Americans filing first-time claims for unemployment benefits over the past four weeks dropped to the lowest level since August 2008, indicating companies are making fewer job cuts as the economy improves. Jobless claims increased in the latest week.

The four-week moving average of initial claims fell to 440,750 last week from 449,750, Labor Department figures showed today in Washington. Weekly jobless claims, which are more volatile, rose a more-than-anticipated 11,000 in the week ended Jan. 9, to 444,000.

Factories are ratcheting up production and companies are slowing the pace of firings as the economy rebounds from the worst recession in seven decades. A decline in employment last month indicates companies are hesitant to add to payrolls until demand accelerates. A separate report today showed retail sales unexpectedly dropped in December.

“The most critical issue is the labor market, and the trend in jobless claims has been down,” said James O’Sullivan, chief economist at MF Global Ltd. in New York. It “implies the labor market is improving,” he said.

Continuing Claims

The number of people receiving unemployment insurance declined to the lowest level since Jan. 10, 2009, and those receiving extended benefits decreased.

Economists forecast claims would increase to 437,000 from a previously reported 434,000 for the prior week, according to the median of 43 projections in a Bloomberg survey. Estimates ranged from 400,000 to 450,000.

Claims have fallen 34 percent since reaching a 26-year high of 674,000 in the week ended March 28.

Continuing claims dropped by 211,000 to 4.6 million in the week ended Jan. 2. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Extended Benefits

Today’s report showed the number of people who’ve used up their traditional benefits and are now collecting extended payments decreased by about 135,587 to 5.3 million in the week ended Dec. 26. Thirty of the states and territories where workers are eligible to receive the government’s latest six-week extension have begun to report that data, a Labor Department spokesman said.


Back in November we speculated that unemployment has changed from a lagging to leading indicator - Unemployment Leading Indicator

We now suspect that many of the figures of the bullish recovery crowd are preliminary numbers subject to downward revisions.  When the market catches on to this game, we expect it will roll over and a downward trajectory will begin.  With the large number of unemployed workers, the long period required to find a new job, combined with a shrinking participation rate in the labor force will start to weigh on consumer confidence again soon.
It is our estimate that these factors will become apparent to the market in the April - May timeframe resulting in a flight to safety in bonds and gold.