The headline initial claims number fell 41k WoW to 404k (37k after a 4k downward revision to last week’s data). Rolling claims fell 4.5k to 411.5k. On a non-seasonally-adjusted basis, reported claims fell 212.5k WoW. As the third chart below shows, claims usually fall sequentially in this week of the year.
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 9.4%, it's 11.4%. So when we say that claims of 375-400k will start to bring down the unemployment rate, we are actually referring to the 11.4% actual rate as opposed to the 9.4% reported rate.
We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 1Q is tracking 38 bps wider than 4Q. The current level of 277 bps is flat versus last week.
Financial Subsector Performance
The table below shows the stock performance of each Financial subsector over four durations.
Joshua Steiner, CFA