Jobless Claims Reach 42-Year Low, But What Does It Mean?

U.S. jobless claims fell by 13,000 to 253,000 last week to their lowest level since November 1973. The surprise drop is certainly good news for a U.S. economy that investors have been concerned is softening in the face of international weakness.

The S&P 500 has reacted somewhat positively to the news, climbing about 4.6 points in morning trading. But what does the 42-year low jobless number actually mean for investors?

“The US labor market remains tight & wage pressures are bubbling to the surface,” economist Joseph Brusuelas told Benzinga. “It bodes well for spending going forward in the service and consumer products sector.”

Brusuelas also notes the low jobless number likely means continuing pressures on corporate margins.

“It is yet another sign of the healing of the U.S. labor market, one of the world’s most powerful engines of job creation,” says Allianz chief economic advisor Mohamed El Erian. “It also augurs well for wage growth which has stagnated for too long.”

Related Link: The Derivatives Market Is Betting Almost Exclusively On A Selloff

Despite the overwhelming majority of derivatives traders that are betting on a market pullback, the surprise jobless claims number has propelled the S&P 500 to new 2016 highs, possibly setting it up for a short squeeze in weeks to come.

After a historically weak start to the year, the SPDR S&P 500 ETF Trust SPY is now up 2.2 percent in 2016.

Disclosure: the author holds no position in the stocks mentioned.