Initial Claims Rise 21k
The headline initial claims number rose 21k week over week to 409k (18k after a 3k upward revision to last week’s data). Rolling claims fell 3.5k to 411.25k. We continue to remind investors that based on our analysis of past cycles, the unemployment rate won't improve until we see claims move into the 375-400k range. That said, it is worth highlighting an important caveat. This recession has been different in that it has pushed the labor force participation rate down by ~200 bps, which has had a correspondingly positive improvement on the unemployment rate. In other words, the unemployment rate isn't really 9.8%, it's 11.8%. So when we say that claims of 375-400k will start to bring down the unemployment rate, we are actually referring to the 11.8% actual rate as opposed to the 9.8% reported rate.
One thing worth pointing out is that in the last two years the first several weeks of the new year have seen raw SA claims rise. We would expect to see this trend continue. If not, it would suggest a stronger underlying improvement in the jobs environment.
There is seasonality in initial claims, which the BLS makes an effort to remove via the seasonal adjustment factor. Below we show the non-seasonally adjusted initial claims series for purposes of comparison.
Yield Curve Remains Wide
We chart the 2-10 spread as a proxy for the trend in industry NIM. Thus far the spread in 1Q is tracking 38 bps wider than 4Q. The current level of 276 bps is up from 272 bps last week.
Financial Subsector Performance
The table below shows the stock performance of each Financial subsector over four durations.
Joshua Steiner, CFA