Slow Progress on the Economy

This morning's news concerning new jobless claims, where the number dropped below 600,000 for the first time since the last week of January (2/5/2009 release), seems to have been ignored by the markets. Oddly, "investors" did not buy into what looks like a nascent recovery, choosing to buy 3% T bills instead.

Now it is true that the moving average is still above that 600,000 level. However, the moving average now has a sustained (slightly) negative slope -- sustained since the middle of March (when the stimulus bill was passed). I expect we will still see a lot of new jobless claims even as some stimulus projects get started (highway projects in our state are just going out to bid) because the hiring will not be in the areas where layoffs are still likely to happen.

Continuing unemployment claims went up modestly. Also not surprising, because the stimulus package - which Congress put mostly in the hands of the states - won't really get rolling at creating new jobs until next month. However, that does bode well for a modest increase in the unemployment rate in July. That will probably be when we will see a market rally.

But what is going on? Are people putting new IRA or 401(k) money into fixed return investments? I'm at an age where a big chunk of mine goes that way, but I would not ignore equities at a point that might be a market bottom, particularly when there is a good chance of inflation a few years in the future. Those 10-year 3% T bills will be worthless then.