Initial Jobless Claims - Leading Indicator for Recovery in Q3?

As suggested in the chart above, initial jobless claims have fallen by over 150,000 since peaking at 674,000 for the week ending March 27, 2009. While new jobless claims of over 500,000 hardly reflects a robust economy, a peaking of jobless claims has generally preceded the official end of a recession by 2-6 months (see data on the last seven recessions under the chart).

The steep drop in this figure over just the last three weeks (105,000 reduction in claims) provides compelling evidence that the worst of the recession may be behind us. While Q3 may very well show GDP growth, particularly with a narrowing of the trade gap, the economy still remains highly fragile and dependent on unprecedented government involvement. Though I have no particular insights into what 2010 brings (much less tomorrow!), i would posit that we could see a double dip recession by the first half of next year as the Fed’s liquidity programs roll off and the nation’s banks are compelled to stand on their own.