Weekly initial jobless claims fell 19k in the week ending July 18 to 284k. This represents a new cyclical low. The four-week moving average, used to smooth out this volatile series, also has fallen to new lows.
The prior week report covered the period during which the monthly non-farm payroll survey was taken. Weekly initial jobless claims fell by about 11k from the June survey period. It bodes well for an extension of the 200k+ streak to six consecutive months.
This chart composed on Bloomberg, is an old favorite. The white line is weekly jobless claims inverted to be more intuitive. A rising line reflects an improving labor market and falling weekly initial jobless claims. The yellow line is the S&P 500.
This does not mean that the improving labor market is the only force helping lift equity prices. In the past, we have discussed drivers like stock buy-back programs and M&A activity that reduce the supply of shares. Some argue that QE has also driven funds into equities. While this seems intuitively true, there is some conflicting data such as lower volumes. In addition, savings have not consistently moved into equity funds.
[Related: The Big Four Economic Indicators: Employment Data Strengthens Optimistic Outlook]
