Is the Jobs Situation Really Looking Better?

Economic data is very important to forex trading, since it provides insight into how much support a currency has. One country's economy, in relation to another's, can affect how those relative currencies interact on the FX market. And one economic indicator is the jobs market.

The labor market has been quite weak recently, and even the recent improvements have been reason for skepticism. The Fed appears ready to abandon some of its loose monetary policies, citing improved economic conditions and improvements (albeit small ones) in the jobs market. Additionally, the latest U.S. GDP figures are offering some hope for the economy.

GFT's Kathy Lien explains in FX360 the reason that it is too soon to be overly optimistic about the jobs picture:

Meanwhile weekly jobless claims continued to fall. The number of people filing for unemployment benefits dropped from 478k to 470k. Continuing claims also declined from 4.659 million to 4.602 million. Given the recent layoff announcements by companies like Verizon, it is difficult to share the Fed's optimism about the outlook for the U.S. economy. Even though the number of people receiving extended benefits also dropped, we are inclined to believe that this reflects the complete expiration of benefits for some Americans and not acquisition of new jobs.