Initial Claims/Europe

After a positive surprise in last week’s Initial Claims data where claims fell to near 400k (408k after revision), they bounced back up to 418k this week, 8k higher than expected and the 15th week in a row above 400k. The 4 week average is at 422k vs 424k last week. Continuing Claims fell by 50k and were 7k below forecasts. Extended Benefits fell a net 133k. Emergency unemployment compensation in particular fell to the lowest since Aug ’09. While we hope the drop in extended benefits is due to claimants finding jobs, there is no question the issue of benefits expiring before a job was found. With respect to initial claims, they remain too stubbornly high and match the lackluster recovery. An aside with Europe, its seems that authorities are turning the EFSF into a grand TARP where funds will be used to not only lend money to sovereign’s but also to buy sovereign debt in the secondary market and also to recapitalize troubled European banks. The ECB also seems to be caving on their insistence of not accepting defaulted paper as collateral for loans as ‘selective defaulted’ debt will still qualify, thus saving the Greek banking system.

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