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CHART OF THE DAY: THE JOBS/EQUITY MARKET CORRELATION

10 December 2009 by Cullen Roche 5 Comments

Just how important are jobs to the equity markets?  If I didn’t know any better I’d think this chart was the S&P 500.  As you can see, the inverse chart of the initial jobless claims data has a disturbingly high correlation with the equity market in the last 18 months.  Keep an eye on those weekly jobless claims.  The likelihood of this correlation ending is very low as jobs growth remains the one primary missing link in the economic recovery:

inverse

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Comments
  • Matt

    You mean that the rising equity markets are putting people out of work? That money has to go somewhere, and right now, that’s the market and not the working man’s pockets.

    12/10/2009 at 12:55 PM
    • Cullen Roche TPC

      This is an INVERSE chart. The falling claims have a very high correlation with the rise in the equity markets….

      12/10/2009 at 12:57 PM
  • SB

    Wow. The correlation is ridiculous. Looks like the red line lags a bit. Is that the S&P line?

    12/10/2009 at 4:24 PM
  • JR

    Sir: Fascinating chart…but…

    What do you make of the stark difference between unadjusted and seasonally adjusted initial weekly unemployment claims? While seasonal adjustments are expected, I’ve noticed that those being used in recent weeks far exceed those for the same weeks in 2007. For instance, for the first week in Dec 2007 the seasonal adjustment added +88,971 jobs to actual state claims; in contrast, for the first week of Dec 2009, the seasonal adjustment was +190,865 — more than double the 2007 seasonal adjustment.

    Could it be that a stock rally built on light volume and weak fundamentals is as suspect as the jobs data being reported by the US Govt? “Garbage in, ….?”

    12/10/2009 at 8:46 PM
  • Owen Eldridge

    Do the charts reflect adjusted or raw data? Great, great graphic.

    12/21/2009 at 1:21 PM