Tony Crescenzi
Senior VP,
Strategist,
Portfolio Manager
Pimco

For jobless claims, the dividing line between job losses and job gains is probably between 450k and 475k, which means that at 466k the latest figure may be pointing to a cessation of job losses.

It is far too early to conclude this is the case, but the persistent downward trend in claims means it is not too early to consider the possibility. The fundamental basis for believing in this thesis is the third quarter's productivity figure, which at 9.5% (annualized) ranked in the top five of the past 50 years.

In other words, businesses in the third quarter had stretched their existing labor force about as far as they could (or at least have, historically). As a result, companies, fearing a loss of market share in a now growing economy, might become compelled to either stop cutting jobs or, in some cases, recall workers they let go when demand for goods and services plummeted last year.

Any recovery in the labor market would initially be viewed as positive for risk assets and the standard reaction would be expected in the financial markets. Ultimately, investors would shift from focusing on whether the job market had turned to its depth of change. At that point, the initial reaction to improved job conditions would be reassessed and market prices would adjust accordingly. Hence, the likely outcome is for enthusiasm to be expressed initially in response to evidence of an improving job market and then excessive extrapolation of the data, because the U.S. economy faces deep structural issues that will impede the magnitude of job gains. For example, automobile and home sales are likely for several years to stay below levels these industries are structurally geared toward. This means that any job gains would represent only a recouping of excess cuts and that many job losses in impaired industries will be long lasting.

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Tony Crescenzi is Senior VP, Strategist, Portfolio Manager Pimco. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the author of "Investing from the Top Down," "The Strategic Bond Investor," and co-author of the 1200-page book "The Money Market."