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Jobless Claims May Be Telling Us Something

While new home sales went south in a big way, and durable goods orders contained some disappointments, jobless claims look the best they've been in more than two years.

Durable goods orders rose 2.7 percent, the best level since September, but the jump in civilian aircraft orders boosted the headline, while core capital goods orders fell a surprise 6.9 percent.

"The case for payroll growth accelerating to 150k or more per month is now stronger." -Pimco senior market strategist, Tony Crescenzi

From the morning email rush, it seems that economists are discounting some of this number to volatility and revisions.

But very disappointing was the 12.6 percent drop in new home sales to 284,000, showing the distressing lack of demand in housing, as prices continue to drop. The decline follows a revised gain of 15.7 percent to 325,000 in December.

But jobless claims tell a bit of a positive story. Pimco senior market strategist Tony Crescenzi points out in a note that when coupled with the latest consumer confidence data, the 22,000 decline in weekly claims to 391,000 is significant. The Conference Board consumer confidence index Tuesday was reported at 70.4, the highest level since February, 2008 and up from 64.8 in the prior month. (Watch Rick Santelli dissect today's economic reports.)

Economists had expected weekly claims to come in at 400,000 or slightly higher, but below the 413,000 the week earlier. The four week average of 402,000 is the lowest since the middle of 2008.

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Crescenzi notes that the consumer confidence survey, released Tuesday, includes two of five questions specifically about employment.

"It reaching a multiyear high therefore is significant. So is any decline in initial jobless claims, and a decline below 400k is especially important.

"The case for payroll growth accelerating to 150k or more per month is now stronger," he wrote.

"All of this is important because that amount of payroll growth is sufficient to give the U.S. economy escape velocity — whereby a self-reinforcing cycle of increase in production, income and spending is in place," according to Crescenzi.

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