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Real Time Insight

This morning’s initial Jobless Claims report is not so bad, but that is solely because recent data on this front has been so disappointing. It nevertheless further confirms the disappointing trend established by the last three monthly non-farm payroll reports.

In my opinion, this is enough to trigger more QE from the Fed. Bernanke may not tip his hand on the QE question in today’s testimony, but the odds are about even that we will get something along those lines in the FOMC meeting later this month. 

Initial Jobless Claims dropped by 12K last week to 377K. But since last week’s tally was revised upwards by 6K, the real drop is actually of 6K this week. The four-week average, which smoothes out the week-to-week volatility, increased by about 1.8K to 377.8K.

The only thing good about this reading is that it’s not that bad. The good thing on the initial claims front will be for this number to start going back towards the 350K level, but it is instead consolidating around the 380K level. This seems to indicate that the labor market has clearly lost the momentum that it was showing earlier this year. 

On the QE question, I agree with those who question the utility of more Fed action in terms of actually improving the economy’s output, given where interest rates already. But I don’t think that’s the key issue here. The issue is market sentiment and I strongly believe that the Fed does care about sentiment in the stock market.

Where do you stand on the QE question?

Do you think the totality of recent labor market data, not just today’s Jobless Claims, is enough to trigger more QE?

Do you think the market needs QE irrespective of its utility to the broader economy?

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