Initial Claims Rise 35k
The headline initial claims number rose 35k WoW to 445k (36k after a 1k upward revision to last week’s data). Rolling claims rose 5.5k to 417k. On a non-seasonally-adjusted basis, reported claims rose 192k WoW. As the third chart below shows, claims are usually elevated in this week of the year. Based on the charts below it seems probable to expect that claims will continue to rise for the next several weeks.
As a reminder, 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.
Yield Curve Continues to Widen
We chart the 2-10 spread as a proxy for industry NIM. Thus far the spread in 1Q11 is tracking 38 bps wider than 4Q10. 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