Unemployement insurance weekly claims report

The most (un)popular weekly statistic, especially during the recession, is out and things are not getting better, or worse (or for the eternal optimist they are, because of a slight dip in unemployment). According to the report, in the week ending May 30, the advance figure for seasonally adjusted initial claims was 621,000, down from the previous week’s revised figure of 625,000. The 4-week moving average was 631,250, up from the previous week’s revised average of 627,250.

On the other hand, U.S. productivity has improved at a great pace, mostly due to large amount of shedding in number of workers and cutting hours, which occurred at a great pace than the slump in output.

So, let’s connect this to today’s drop in treasury rates. During the recession, US has been borrowing a lot to make up for its public and private spending. To cover for its fiscal and trade deficit, US has continually issued govt. securities (bonds/notes/bills) to lenders (like the Chinese govt. and companies). Since the entire world believes that investments in US, especially in govt. securities are one of the safest bets (called the safe haven effect), a lot of treasuries have been sold in the past few months. Since the government has to service this debt, the fed kept the interest rates pretty low (and sometimes almost zero) on its securities. As less and less people file for unemployment benefits, more private and corporate tax is paid in to the government, helping it to reduce its deficit and service (and also reduce) the debt. So, the better the unemployment numbers, the higher the yields on treasures.