Initial Jobless Claims numbers are out....

This week's data is more important than usual because it covers claims in the week ending January 15th...which includes the 12th day of the month.

Why does that matter?

Because the Bureau of Labor Statistics conducts their Employment Situation Report surveys in the week/pay period that holds the 12th day of the month. Specifically the Household and Establishment Surveys.

This the verbiage shared by the BLS: "For both surveys, the data for a given month relate to a particular week or pay period. In the household survey, the reference period is generally the calendar week that contains the 12th day of the month. In the establishment survey, the reference period is the pay period including the 12th, which may or may not correspond directly to the calendar week."

Plain and Simple: On February 3rd when we're looking for guidance on how the January Employment Situation might look, we could use today's Initial Jobless Claims report as a indicative guidance giver.

Reuters Quick Recap...

RTRS-US JOBLESS CLAIMS FALL TO 404,000 JAN 15 WEEK (CONSENSUS 420,000) FROM 441,000 PRIOR WEEK (PREVIOUS 445,000)

RTRS-US JOBLESS CLAIMS 4-WK AVG FALLS TO 411,750 JAN 15 WEEK FROM 415,750 PRIOR WEEK (PREVIOUS 416,500)

RTRS-US CONTINUED CLAIMS FALL TO 3.861 MLN (CON. 3.925 MLN) JAN 8 WEEK FROM 3.887 MLN PRIOR WEEK (PREV 3.879 MLN)

RTRS-US INSURED UNEMPLOYMENT RATE UNCHANGED AT 3.1 PCT JAN 8 WEEK

RTRS-US CONTINUED CLAIMS LOWEST SINCE OCT 2008

RTRS-TABLE-U.S. jobless claims fall in latest week

Excerpts from the Release...

In the week ending Jan. 15, the advance figure for seasonally adjusted initial claims was 404,000, a decrease of 37,000 from the previous week's revised figure of 441,000. The 4-week moving average was 411,750, a decrease of 4,000 from the previous week's revised average of 415,750.

The advance number of actual initial claims under state programs, unadjusted, totaled 550,594 in the week ending Jan. 15, a decrease of 212,504 from the previous week. There were 652,327 initial claims in the comparable week in 2010.

The 37,000 drop in claims was the biggest since the week that ended Feb 6, when claims fell by 51,000. Analysts had expected weekly jobless claims to fall to 420,000.

Overall this paints a positive forward looking picture for the Employment Situation Report.

THE ASTERISK: A Labor Department official said the larger-than-expected decline was partly explained by jobless claims returning to trend after the big rise the earlier week, which may have been skewed by the holiday season.

Market Reaction...

Bonds are selling and stocks are recovering from overnight weakness (with little success)

S&Ps are -3.75 at 1274.75 after falling as far as 1270.75 right after the data flashed. This is a modest rebound but equities are having trouble breaking through their overnight lows.

The benchmark 10year TSY note is -15/32 at 93-19+ yielding 3.396% (+5.9bps). The spike is obvious but 10s have found support at the mid-range pivot/cluster near 3.40%. We could run as far as 3.42% and still have hope for a quick turnaround, but if 10s break 3.42% we'd be looking for another test of 3.46%-3.50%.

 Rate sheet influential MBS prices are falling. The decline was steep. Loan pricing will be worse this AM.

Yeh this claims data paints a positive picture for payrolls growth...but it does little to make us believe growth is sustainable enough to rapidly reduce the unemployment rate. We're still dealing with a two-headed labor market monster.