The Weekly Unemployment numbers

This morning the government announced that new claims for unemployment last week fell just under 400,000. This is welcome news. It is the third week in a row where the number has been just about 400,000 and this would be the first week in months that the results were actually under that figure. A few weeks ago, the government announced results of 395,000 but that was later revised to be more than 400,000.

The key point about these figures is that they show that the labor market has not faltered in recent weeks. With the upset of the debt downgrade and the stock market gyrations, a reasonable person would worry that these would be reflected in the jobs figures. So far, the good news is that the trend remains steady.

Another piece of news out today was a major rise in the trade deficit. It hit the highest level in a few years. As a result, there will likely be a downgrade in the growth rate for GDP that was previously announced for the second quarter. Although it is bad news, it is also old news. The latest employment figures tell much more about where we are now than the older trade deficit.

The real key to the economy in the short term is the nature of the resolution, if any, of the European sovereign debt crisis. If the upcoming Merkel-Sarkozy talks bring some sort of quiet in Europe, things should calm down here as well. Stability and even increases in the markets will encourage consumers to return to spending that may have been held back as a result of watching record drops on Wall Street. On the other hand, if the Europeans are unable or unwilling to resolve their problems, we may soon watch the collapse of some large european banks or at least steps in that direction. If that happens, all bets are off and we may start looking back at this week as the "good old days." It would be nice to think that the USA is playing a constructive role in helping Europe come to some resolution. Given the lack of leadership in the White House and the Treasury, I think it is safe to assume that Obama has changed from "leading from behind" to "leading from vacation."