American Employment Outlook Improves
The number of Americans applying for unemployment benefits fell to the lowest level seen since 2008. The Labor Department reported on Thursday that applications for unemployment benefits fell 13,000 to a seasonally adjusted figure of 348,000. Today's announcement of a drop in unemployment applications was the fourth reported decline in the last five weeks and just the latest sign of an improving American economy.
Also, the four-week average of unemployment applications fell for the fifth week in a row to 365,250 claims. The four-week average can be a better indicator of the direction unemployment claims are headed because it evens out unusual fluctuations that can occur in the weekly results.
Today's figures were just the latest good news about the employment outlook in the United States. The unemployment rate dropped for the fifth consecutive month in January to 8.3 percent. January also saw 243,000 jobs added to the American economy, which was the biggest gain in nine months.
The news of falling unemployment claims couldn't have come at a better time for the stock market. Stock markets around the world had been down on news that Greece and its creditors are having trouble reaching a deal that would see the troubled Eurozone country avoid a default. The markets have also had to deal with the news that Moody's Investors Service has put more than a dozen banks with global operations and over 100 European banks on notice that they were at risk of being downgraded.
Stock markets across Asia ended Thursday lower because of all the bad news that the market was hit with. Most European stock markets were also down for much of Thursday but received a much needed boost from the positive economic numbers coming out of America. With even China's economy in danger of slowing down because of weak domestic demand and the financial crisis facing Europe, an improving American economy could help avert a global economic slowdown.
Traders who believe that the improving unemployment numbers reported today are a sign that the American economy is improving might want to consider the following trades:
- The SPDR S&P 500 (NYSE: SPY) and the iShares Russell 2000 Index (NYSE: IWM) ETFs both give traders exposure to a wide range of American stocks. If the unemployment rate continues to drop, it will be a sign that the companies in these indexes are hiring in order to expand and rising profits could follow. American companies would also benefit if American consumers started spending more.
Traders who believe that it's too early to say that the American economy is set to grow may consider alternative positions:
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