One reliable job market indicator has done nothing but impress since the disappointing March jobs report

Since the March jobs report, initial jobless claims data has done nothing but get better.

And this could be a big deal for Friday’s April jobs report, according to Joe LaVorgna, economist at Deutsche Bank.

In a note to clients ahead of the report, LaVorgna wrote:

April nonfarm payrolls are projected to snap back from March’s well-below-trend increase of just 126k. The primary reason we expect the rate of job growth to improve is initial jobless claims. While the latter measures layoffs and not hiring per se, we have found claims to be the single best predictor of monthly employment gains. As a general rule, when companies are not laying off many people, which is apparent from the current claims data, the pace of job growth tends to accelerate. The opposite is true when claims are rising: labour market gains tend to be slowing, or in some cases, there is outright job contraction.

On Thursday morning, we got the latest reading on initial jobless claims, which showed that initial filings for unemployment insurance totaled 265,000, up 3,000 from the prior week’s number, which was one of the lowest single-week totals in the last 40 years.

As for the rest of the report, LaVorgna expects the unemployment rate will fall to 5.4% with average hourly earnings expected to rise 0.2% month-on-month and earnings rising 2.3% over the prior year.

LaVorgna notes that if wages rise in-line with his forecast, which is also consensus expected by Wall Street economists, it would be the biggest year-on-year increase since August 2013.

Here’s the drop in claims that LaVorgna is eyeing.

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