May 19: Jobless Claims Fall – Economic Highlights

Weekly Jobless Claims dropped a bigger than expected 29 thousand to 409 thousand last week, reversing the negative trend in this key series that appeared to be taking hold in recent weeks. The 4-week average, which smooths out the series’ inherent week-to-week volatility, dropped by 1250 to 439 thousand. This strong Jobless Claims read should help stocks sustain Wednesday’s positive momentum.

Claims moved above the important 400 thousand level last month after consistently coming down to the under-400 thousand level earlier in the year. A number of technical and administrative reasons were given for the recent upswing in claims, ranging from issues related to the start of a new quarter to the Good Friday holiday and emergency benefits in Oregon.

The drop today and last week bears out those explanations. We need the jobless claims numbers to fall below, and stay, the 400 thousand level in the coming weeks to put the labor market recovery on a sustainable trend line.

The earnings calendar is fast thinning out. We had a handful of retailers reporting this morning, with the overall picture from this morning’s reports largely a mixed one.

Sears Holdings (SHLD) came up short of expectations, big time, with soft same-store sales numbers for both the Kmart and Sears units. The lower end of the consumer market has been weighed down by rising gasoline prices as we saw earlier this with Wal-Mart (WMT) and Target (TGT). Williams-Sonoma (WSM), the home-products retailer, beat EPS and revenue expectations on the back of robust online results and guided higher. We have Gap (GPS) reporting after the close today.

We also had a red-hot IPO late yesterday from LinkedIn (LNKD), which was priced at the high end of its offering range. This gives the professional networking site a market capitalization of over $4 billion. LinkedIn’s warm market reception sets the stage for the more highly anitipated market debuts from Facebook and Groupon in the coming days.

The positive Jobless Claims report is the more important of the economic reports on tap today. Other reports on the docket for later release inlcude consumer confidence and existing home sales. The labor market recovery would be a key driver of putting the economy on a sustainable growth trajectory.

Existing Home Sales are scheduled for release today at 10:00 AM EST and are expected to rise by 2.3%. The Leading Indicators Index is also scheduled for release at 10:00 AM EST and is expected to increase by 0.1%.