US continuing jobless claims for the week ended October 25 rose to 3843K, the highest reading since 1983, which suggests that Friday's employment data could be very disappointing. In fact, non-farm payrolls, one of the most watch US economic indicators, are already forecasted to plunge by a whopping 200K.

Another important thing to watch, though, will be the unemployment rate, which is anticipated to rise to 6.3 percent from 6.1 percent, matching the June 2003 high. However, if the rate climbs even higher, it will actually end up being the highest since the early 1990's. Looking at a chart of continuing claims versus the unemployment rate going back to 1970, it's clear that the figures used to be significantly more correlated. However, changes to the methodology used by the Bureau of Labor Statistics (BLS) to calculate the unemployment rate since 1994 have weakened the link. It is also worth noting that a rise in the US participation rate from roughly 60 percent in 1970 up to 66 percent in September 2008 has likely lessened the impact very slightly.

Regardless, one thing is obvious: unemployment is rising, and with the economy still in the process of slowing, it is unlikely to improve anytime soon.

US Continuing Claims (Weekly) vs. US Unemployment Rate (Monthly)


Jamie Saettele is a Technical Currency Analyst for FXCM.