US LABOR DEPARTMENT WEEKLY UNEMPLOYMENT CLAIMS

US LABOR DEPARTMENT WEEKLY UNEMPLOYMENT CLAIMS

The weekly Initial Unemployment Claims figure for theweek ended 27thJun-08 clocked in at 404,000. This is thehighest claims level since a 58-month high of 406,000 wasreached in the week ended 28th Mar-08. Until Mar-08, thehighest level this business cycle had been a level of425,000 reached in Sep-05 in the aftermath of thedestruction brought upon by Hurricane Katrina. As a general guide, initial claims exceeding the 350,000-400,000 band raise red flags as they are consideredsuggestive of the onset of a recession. Unemployment claims spike, signal USeconomy is f lirt ing with a recessionThe companion to the initial claims data, the ContinuingClaims or the insured unemployed figure for the weekpreceding clocked in at 3.116 mn, although off from therecent peak 3.136 mn level reached at the end of May-08.Recent gains in claims have reached 30.3% above cyclicaltrough levels. Gains exceeding 26% have neverpreviously failed to precede US recessions in the past.Pickup from cyclicaltroughs accelerating!Although markets had celebrated a near-miss appointmentwith a US recession back in Mar-08 on the Bear Stearnsrescue, we think a US recession has been postponedrather than avoided. A 4Q-08 appointment with a USrecession now appears to be looming, in our assessment.