Where is the oil shock? Initial unemployment claims in the United States dropped to the lowest level since mid-2008 throws everyone's speculation about commodity headwinds off. Take inflation talk from Trichet over at the European Central Bank amid what looks like blockbuster postwar economic growth in the European Union -- and add what could yet become a solid U.S. labor market to the mix -- and it is no wonder markets are confused. Many traders are so conditioned to see the downside in every macro development that there has been a lot of dread about last week's higher oil prices somehow pushing the brakes on U.S. hiring activity in the here and now. It takes more time than that for managers to even notice an uptick in commodity costs, much less decide to act on it by laying off staff in order to compensate. Businesses are competing more fiercely for scarce energy resources and as yet they are still hiring more people -- initial jobless claims dropped 20,000 last week to a level last seen in May 2008, right before the wheels came off the cart. The ADP numbers were strong as a bull yesterday and the non-farm payrolls loom large tomorrow. Ultimately, these are good problems to have as long as we can keep the Middle East from dissolving, and that prospect looks less remote these days. What does this mean for trading strategy? The developed-world play -- SPY ( quote ) and EFA ( quote ) is alive and well. EEM ( quote ) remains to be seen, but as we have argued long and hard , the growth story here is unaffected by the market's decision to reallocate money into previously bargain-priced developed-world stocks. The dollar may be due for some strength as well. Remember, the Fed has the freedom to raise interest rates and protect the dollar when it comes time. As long as the "Club Med" countries are suffering under their debt burdens, the ECB does not. A bullish factor for the dollar ( UUP , quote ), a check on the dollar bears ( UDN , quote ) and not a positive for the euro ( EU , quote ).

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