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Here’s Why You Should Be Very Worried About These Bullish Claims

The fact that initial unemployment claims keep making record lows does not mean what Wall Street and its Big Media PR flacks want you to think it means.

First time claims for unemployment compensation continued their string of record lows for the same week of the year. The actual number, not subject to any seasonal hocus pocus was 263,427. That was just 1,858 claims per million employed workers last week. That compares with 2,270 per million in the same week of 2006 just as the housing bubble was on the brink of deflating, and 2,294 in that week of 1999 as the internet/tech bubble was peaking.

The Department of Labor (DoL) reports the unmanipulated numbers that state unemployment offices actually count and report each week. This week it said, “The advance number of actual initial claims under state programs, unadjusted, totaled 263,427 in the week ending November 14, a decrease of 27,633 (or -9.5 percent) from the previous week. The seasonal factors had expected a decrease of 22,113 (or -7.6 percent) from the previous week. There were 286,115 initial claims in the comparable week in 2014. ”

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We use actual data, as opposed to the seasonally manipulated headline numbers which Big Media shovels out for mass consumption. To see from the actual numbers if there’s any evidence of trend change we must look at how the current week compares with the comparable week in prior years.

The actual change for the current week versus the prior week was a decline in claims of -27,633. The 10 year average for actual data for that week was a decrease of -22,688. The same week last year saw a decrease of -23,233.

Week to week changes are noisy. The trend is what matters. Since 2010 the annual change rate each week has mostly fluctuated between -5% and -15%. Last week was within that range with a year to year drop of -7.9%.

A persistent shift to a year to year increase in claims would be a sign that the US economy is headed for recession. That has yet to happen.

The stock market is a key. When it weakens, employers normally take their cues from that. The Fed knows that businesspeople watch the stock market and often base hiring and firing decisions on its direction. A weakening market would not only make the Fed even more cautious about attempting the charade of raising rates, it would at some point possibly even put QE back on the table.

In spite of all the evidence from Japan, Europe, and the US that QE stimulates only financially engineered bubbleization and not real economic growth, central bankers continue to believe the economic mythology that it does. So the Fed has been cowering in reluctance to shrink its balance sheet and return to any semblance of a “normal” monetary policy.

In the meantime, the Fed has enabled and encouraged financial speculators and corporate executives to carry out a massive skimming operation which impoverishes an ever increasing portion of US households. Likewise, businesses have acted out a low-pay job hoarding bubble in response to the signals from the Fed QE-driven stock market bubble that has only recently stopped bubbling.

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Employers saw the housing bubble beginning to deflate in 2006 and reacted accordingly, starting to lay people off that year. Stock traders were the last to get the news as the Fed kept growing its System Open Market Account (SOMA) at the then “normal” growth rate of 5% through mid 2007, when it stopped, before shrinking the SOMA late in 2007 and 2008.

The Fed stopped growing the SOMA last October. Since then stock prices have leveled out. But employers continue to hoard their low paid workers.

The longer this goes on, the closer we come to the next “adjustment.” It won’t be pretty.

I chart and analyze the real time Federal Withholding Tax data in the weekly Wall Street Examiner Pro Trader- Federal Revenues report. It has been an excellent predictor of  final revised non farm payrolls and GDP. 

Addendum (Reposted from earlier reports)

In the Tale of Two Economies, massive gains accruing to the investor/speculator/corporate mafiosi class skew the headline economic numbers positive while the bulk of the American people experience no gains. QE and ZIRP have caused Ben Bernanke’s trickle to pool at the top with the banker/speculator/investor/corporate looter crowd. Meanwhile, the vast majority of American families have seen their household income stagnate for more than a decade as QE and ZIRP create perverse economic incentives that work to their detriment. The ever increasing economic drag which that creates will eventually result in negative top line numbers, but we aren’t there yet.

Record low claims are the patina of policy success that Wall Street and the dangerous, corrupt media empires that spread its propaganda use to anesthetize and hypnotize the public. The data hides the basic truth that most Americans are not doing well economically. These record claims represent a bubble that was born out of and is joined at the hip with the financial engineering bubble that has been metastasizing in the US economy for a generation.

We can thank central bank policy for the economic divide it has wrought and for the long term adjustment that lies ahead. The stock market faces the problem of reduced long term profitability that will ultimately result if most Americans can’t afford to buy the products and services that corporate America produces.

If you are new to these reports, here is a review of the key historical antecedents of the extreme readings on initial claims from a post, August 13, 2015.

 Historical Initial Claims and Bubbles

Historical Initial Claims and Bubbles

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“In recent weeks, Big Media and others have noted the fact that claims were recently lower than the record low of 1973. What they failed to mention was that that low came well after the Dow reached an all time high in January of that year. The devastating 1973-74 bear market, which cut the value of stocks by 50%, was in its early stages. This was an early example of employers being late to the funeral.

“Similar employer hoarding of workers has been associated with bubbles in the more recent past and has led to massive retrenchment, usually within 18 months or so. In the housing bubble, employer hoarding behavior continued well beyond the peak of that bubble in 2005-06.

“It’s worth noting that there was an institutional stock market bubble in 1972-73. It was the Nifty Fifty bubble, where the biggest best known stocks kept soaring while everything else in the market went nowhere. A bubble does not require mass public participation. Institutional bubbles are just as insidious, even more so.

“The current string of record lows in claims is now 6 months beyond the point at which other major bubbles have begun to deflate. Based on the fact that previous records were attained at and for some time after the peaks of massive bubbles, by that standard, the current financial engineering, central bank bubble finance bubble, which is very much a big money, institutional bubble, may be the bubble to end all bubbles!

This Week Will Tell If The Bear is Really Coming Out of Hibernation

Last week’s selloff did less damage than it may have felt like. The drop stopped in the area of 3 crossing uptrend lines, ranging in length from short term to long term. Here’s what would tell us whether the uptrend is still in force, or signal that something evil this way comes.

I have added 8 new stocks to the swing trade chart pick list, including 2 shorts.

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These reports are not investment advice. They are for informational purposes, for a broad audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance. 

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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