Jobless Claims Have Bottomed out. China Trumps Domestic Fundamentals.

Challenger Job-Cut Report (December 2015)

– Announced Layoffs   23,622. Previous was 30,953

Initial Jobless Claims (week ended 1/2/2015)

– New Claims seasonally adjusted 277,000. Previous was 287,000
– New Claims unadjusted, totaled 405,122 an increase of 58,580 from previous
– 4-week Moving Average   275,750. Previous was 277,000

This is another case where it is difficult to tell if we are measuring Jobless Claims or the accuracy of the seasonal adjustments.  Looking at the history of Initial Claims for the past 5 months it looks as if they bottomed out a few months ago.

The bigger picture is of the world economy.  To simplify this consists of two large problems:  1) China and 2) oil exporters.  China needs to own up to the fact that it has both a housing bubble and an equity bubble.  The government has tried to intervene repeatedly to support the equity bubble but that is not working.  The median P/E of Chinese publically traded companies is about 65.  In the U.S. it is about 19 and falling.  China has problems with equities, banking, housing, currency, and the fact that unlike the U.S. its GDP is not based on consumer spending but government spending and investment.  Other that that, things are fine there.

In short, market in the U.S. will not be driven this year so much by domestic fundamentals as they will by what is happening in China and whatever problems are faced by collapsing economies in oil exporting nations.

This also highlights the point I made in December that by hiking rates the Fed was blinding itself to the fact that policy needed to include not only domestic unemployment and inflation but needed to account for the rest of the world.