Jobless claims will be released today at 8:30 AM Eastern Time. Consensus is expecting them to ease back, but remain far too high. Watch for any positive surprise heading meaningfully down towards 400,000, or any negative surprise where they are approaching 500,000:
Deutsche Bank’s Joseph LaVorgna:
We expect jobless claims to retrace some of the previous week’s run-up, but the 4-week moving average will remain elevated. We focus most on the 4-week moving average because the weekly figures can be quite volatile. Our claims forecast implies the 4-week moving average stays at 467k, a fairly high level which is consistent with the kind of slow uneven payroll gains we have seen thus far in 2010.
Assuming that Census hiring is down 60k means July nonfarm payrolls should come in around +40k. We need claims to move below 400k on a sustained basis for us to be confident the economy will generate the 250k to 300k jobs per month which would be a necessary condition for Fed tightening. At the moment, we are a long way away from such a development.
Thus a sharp positive surprise today could reinvigorate forecasts for a sooner-rather-than-later Fed interest rate hike, though this is highly unlikely today.