What the latest jobless data says about US stock markets

How can you tell where America’s stock market is going?

Answer: keep a close eye on US initial jobless claims. We wrote about this last week: The one chart that tells you where the US economy is heading.

In a nutshell, it’s a good all-in-one guide to where both the US economy and the stock market are heading.

And the latest numbers are just out. The weekly figure showed a fall of 19,000 claims to 457,000. That may look like a big drop – but the four-week moving average – which smoothes out volatility – is down by just 1,500.

What does this mean? All becomes clear when you look at the chart below. The red line is the four-week moving average of initial jobless claims. This has been inverted – when it rises on the chart, US dole queues are getting shorter, and vice versa. The green line is the S&P 500 index.

Chart: Bloomberg

In short, the latest figure is broadly neutral for the stock market. But we’ll be watching it closely. If the picture changes, we’ll let you know.