The pain is still there from last Friday’s disappointing jobs report, but at least this week brought brighter news for the jobs front, when the Labor Department released its weekly report on jobless claims.
To start, the report made headlines with the announcement that last week’s jobless claims decreased 12,000 to 377,000. This is important because any decrease in jobless claims signals accelerating job growth, at least in the short term. This figure was largely in line with economists’ estimates, which called for claims to drop to 375,000. The four-week moving average, which is a better indicator of longer-term trends, inched up 1,750 to 377,750.
Today’s jobless claims reports gave the markets just the push they needed to sustain the latest multi-day rally. However, the triple-digit gains retreated during the first few trading hours retreated slightly after Ben Bernanke took to the microphone in a testimony before the Congressional Joint Economic committee.
The goods news is that Bernanke and the Federal Reserve System expects the U.S. economy to continue to improve—modestly, at least—thanks to improvements on the jobs front, in the banking system as well as in the housing market. Bernanke predicts that tight household budgets as well as decreased public spending will continue to weigh on the market.
However, the Federal Reserve will also not enact additional monetary easing unless the economy clearly sags. Bernanke is adopting a “wait-and-see” policy so that the Fed can first assess the impact of existing policy on inflation in the U.S.
This is exactly what I told you to expect in Tuesday’s blog post. The fact is that independent of any additional Fed stimulus, corporate profits have been steadily rising for the past several quarters, and I expect booming bottom lines to continue to drum up interest in the stock market. Nonetheless, I’ll be keeping an eye out for any additional news from Bernanke and the Fed, and I’ll have it all covered in later blog posts.