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Job Market Improving, but Way Too Early to Claim Victory

Job seekers wait in line to meet with employers at the 25th Annual CUNY big Apple Job and Internship Fair at the Jacob Javits Convention Center in New York City.
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Job seekers wait in line to meet with employers at the 25th Annual CUNY big Apple Job and Internship Fair at the Jacob Javits Convention Center in New York City.

The U.S. dollar Index shot up midday, largely on yen weakness, as the dollar/yen crossed 100 for the first time since 2009. The WisdomTree Japan Hedged Equity Fund, which hedges out the effects of currency on a basket of Japanese stocks, shot up to a new high on heavy volume.

Stocks weakened shortly after that. Charles Plosser, head of the Philly Fed, said he would like to see the Federal Reserve slow bond buying soon. I have no doubt Mr. Plosser would, because he is a well-known hawk, but he is also not a voting member of the FOMC.

There are rumors of a Wall Street Journal article coming that the Fed is considering scaling back bond purchases. Maybe, but I don't understand this talk: Ben Bernanke has repeatedly said the Fed needs to see consistent, sustained evidence that the economy was turning around. We certainly don't see that, do we?

True, we do see signs that the job market is improving, but it is still early. At 323,000, jobless claims are at their lowest levels in five years. That has positive implications for the economy, and for stocks.

Deutsche Bank noted that "consistent readings on claims prints below 350,000 are strongly associated with 200,000-plus nonfarm payroll gains." We've only been over that level three times in the last 13 months.

As for the stock market: Michael Darda, chief strategist at MKM Partners, and others have noted that jobless claims have been highly correlated with the S&P 500 in the last decade ... that is, as claims go down, the S&P goes up.

Still, everyone agrees that unemployment (and underemployment) is still way too high, and, as ISI noted this morning: "We desperately need a period of catch-up growth for the labor market. And we believe we are getting closer to seeing it materialize thanks to the upswing in housing, stronger household/financial sector balance sheets and a more growth-supportive Fed policy."

By CNBC's Bob Pisani

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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