Amidst the worries over some future Fed tightening, misplaced angst about inflation and chatter about the S&P 500 touching 2000, investors seem to be ignoring a few reliable economic indicators. One of the more consistent signs is the weekly initial unemployment claims report – people applying for unemployment insurance. The news is good and the economy is strong.
The chart shows a four week moving average to smooth out a few bumps and some noise. The pattern is clear all the way back to the late 1960s: anything over 400,000 is cause for concern and probably a recession; anything under 300,000 is a strong economy. The weekly numbers are headed in the right direction: today’s (July 24th) was 284,000. The four week moving average was 302,000.
Eventually the Fed will raise interest rates, inflation won’t be stuck at 2% forever and the market will, sooner or later, correct. Rather than spending the whole time wondering when all this will happen, remember the economy is looking good right now.
This article was written by David Blitzer, chairman of the index committee, S&P Dow Jones Indices.
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