Initial Jobless Claims were 9k more than expected. But Continuing Claims were 103k less than expected. As we have regularly noted, Street spinmeisters ignore Continuing Claims when they are worse than expected but herald the rebound in the job market when they are better than expected.
We noted almost two months ago that Continuing Claims were set to decline appreciably but it would NOT be a sign of a jobs rebound. It would be Americans exhausting their unemployment benefits.
Over the past month numerous pundits and the media have reported on the increasing number of people that have exhausted benefits or were about to exhaust their unemployment benefits.
Bloomberg: The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 4.7 percent in the week ended July 18. [This suggests the Continuing Claims decline is due to benefits exhaustion.]
The ‘Exhaustion Rate’ [of unemployment benefits] jumped to 49.77 in June, up .60 from May. This suggests that about 400k people (Continuing Claims) exhausted their unemployment benefits in June.
And we can reason that x-hundred thousand people exhausted their benefits as July progressed. This would account for virtually the entire decline from the Continuing Claims peak of 6.9m – regardless of seasonal adjusting chicanery.
Is this a reason to rally? Of course not!
So why the big rally on Thursday? We addressed this a few days ago when we opined that July performance gaming should commence late on Wednesday. And we regularly note that performance gaming is most intense on the penultimate day of the marking period, which was yesterday.
We also remarked that anxiety over Friday’s GDP report would induce traders to insure that markets received maximum gaming on Thursday.
It was amusing to watch the financial media, especially the TV networks, try to explain Thursday’s rally on fundamentals. Some tried to attribute the rally to Motorola’s smaller than expected loss!
Please make some notation on your calendars that highlights expiration week and the penultimate day of the month. These are the periods of maximum upward manipulations of stocks.
PS – Trading sources said Goldman bought 1000 SPUs after the open yesterday.