Merk Investments: Jobless Claims

Initial claims for the week ending 2 August surprised to the upside arriving at 455K on the back of a revised 448K posted during the previous week, which is a six year high. The four-week moving average settled in at 419K. Continuing claims, which are released with a one-week lag, arrived at 3.311 million implying that the rate of unemployment continues to rise.

The Labor Department indicated that the workers filing for an extension in benefits under recently passed legislation, which enabled those individuals, to be identified as first time filers may have contributed to the unexpected increase in initial claims over the past two weeks. While this augers for a bit of volatility back towards the downside, the increase to 419K in the far less volatile four week moving average we believe confirms our conjecture that a new range has formed in the headline above the 400K threshold that traditionally implies a recession in the labor sector. We think that the labor sector will continue to shed jobs on a month basis between 75-110K over the next several months.

Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy

This report was prepared by Merk Investments LLC, and reflects the current opinion of the author.  It is based upon sources and data believed to be accurate and reliable.  Opinions and forward looking statements expressed are subject to change without notice.  This information does not constitute a solicitation or an offer to buy or sell any investment product, nor provide investment advice. Merk Investments does not own any of the stocks mentioned; this is not an offer to buy or sell any security mentioned.