Some Curious Divergences Are Showing Up, And They Spell Good News For Employment

A number of divergences are showing up in US data which may bode well for both equities and employment.

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Take New Orders from today’s ISM Manufacturing report:  in the past decade, a large jump has preceded significant equity appreciation.  It makes sense, of course:  orders turn into production, which turn into earnings.  In past situations, the undue cynicism towards equities gave these divergences great informational value — and buying opportunities.
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The relationship between Initial Claims and the Unemployment Rate is a simple one:  the latter lags the former.  The gap has never been this large.  In nearly every case, the Unemployment Rate has moved its way down to follow Initial Claims down, with a few exceptions which may rhyme with the present-day economic conditions.
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The relationship between Wage & Salary Disbursement growth and the Unemployment Rate furthers the case that the Unemployment Rate is destined to come down.  This relationship has been consistent, and provides reinforcement to the previously mentioned Initial Claims argument.

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This post previously appeared at Macrofugue >

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