Thoughts

I am hearing that Meredith Whitney cut her rating on GS.

Here are some sobering and cautious thoughts on the claims announcement released this morning from Dan Greenhaus of Miller Tabak:

* Initial claims were less than expected, falling to 454,000, down 21,000 from the prior week.

* As reported, continuing claims fell to 4.413 million from 4.637 million in the prior week.

* Our measure of total continuing claims fell another 280,000 to 9,214,367. Over the last four weeks, this measure is down nearly 900,000.

Over the next several weeks and months, there is the very real possibility that several labor market indicators including weekly jobless claims, total continuing claims and the unemployment rate, will "improve" on their face. However, there is almost no doubt that the recent decline in continuing claims data reflects the lack of benefit extensions on the part of Congress. On July 1st, the House was able to extend funding or unemployment benefits however the Senate failed to pass the measure and will not revisit the issue until after summer recess ends on the 12th. As it stands now, we're not sure any bill extending benefits will pass in nearly any form.

In the meantime, nearly 3 million people will cease being able to file for benefits, the result of which we're seeing already; total continuing claims have fallen nearly 900,000 over the last several weeks. When viewed that way, the decline in continuing claims is unquestionably a negative for spending power and economic output. According to J. Rodgers Kniffen WWE, this will result in a lost of about $41 billion in incomes, a not inconsequential amount.