Jobless claims continued to disappoint markets by edging down only 1,000 to 388,000 in the most recent week, after being revised up yet again for the previous week. Moreover, the four-week moving average rose, reaffirming the view that unseasonably warm, winter weather artificially juiced the first quarter. Now, we are seeing a payback for those gains; reality for the economy lies somewhere in the middle.
The real test will come tomorrow when the latest GDP figures are is scheduled for release. Real GDP is expected to exceed 3% in the first quarter, which is much stronger than most were expecting at the start of the year (before the temperatures shot up so that we could play golf in January in Chicago). The next test comes when the jobs data for April will be released, next Friday; the payroll data for April is likely to come in closer to 100,000 than 200,000, much less than expected in early 2012. Buckle your seat belts as the road to recovery gets rocky again.
Bottom Line: The recovery has more resilience than it did a year ago, but tail risks remain. Europe, oil prices and our own fiscal impotence all have the ability to dampen or, in some cases, derail those gains.