Revisiting Jobless Claims & Market Performance Correlation

Back in October 2009, we ran an article that noted an interesting correlation between Seasonally-Adjusted Weekly Jobless Claims and the market.  The jobless number peaked right before the famous March 2009 market bottom and headed lower afterwards, in line with a strong S&P 500 Index (SPX) (SPY) rebound.  Since that time, we've also discussed the correlation between Capacity Utilization & Industrial Production with the stock market.

Here was the original chart in 2009:

Jobless Claims & SPX

Let's revisit this indicator to see how it has held up since that time:

Jobless Claims & SPX, Current

You can see above that right at the beginning of 2010 the rate of decline in jobless claims slowed, and this also coincides with the end of the very sharp upward slope on the market trend.  However, the general trend in claims has been consistently lower since 2010 -- and this is line with a generally higher market trend since that time.  Certainly the SPX has had more ups and downs but the overall trend has been higher.

From here the major concern on the jobless claims chart is what will happen when/if we reach the 2007/2008 claims levels -- assuming the downward trend continues.  This coincides with the SPX approaching the 2007/2008 highs around the 1500 level, which is the clear major overhead long-term resistance on the chart.  Of course, that's still about 13% higher from here, so there is some more upside potential before we reach the crucial levels.

Just a reminder that the normally the jobs report comes out every Thursday at 8:30 am EST.  It is released by the Dept. of Labor and is available here.