The headline initial claims number rose 29k to 397k (26k after a 3k upward revision to last week’s data). Rolling claims rose 3k to 392.25k. On a non-seasonally-adjusted basis, reported claims rose 55k WoW. This is only the second WoW increase in NSA claims in 2011. While seasonally adjusted claims have been volatile, the NSA series, until this week, was steadily falling.
We have been looking for claims in the 375-400k range as the level that can begin to bring unemployment down. If this level is held, we expect to see unemployment improve. 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 8.9%, it's 10.9%. So when we say that claims of 375-400k will bring down the unemployment rate, we are actually referring to the 10.9% actual rate as opposed to the 8.9% reported rate.
One of our astute clients pointed out the relationship between the S&P and initial claims shown below. We show the two series in the following chart, with initial claims inverted on the left axis.
Yield Curve Remains Wide
We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 1Q is tracking 42 bps wider than 4Q. The current level of 278 bps is unchanged vs last week.
Financial Subsector Performance
The table below shows the stock performance of each Financial subsector over four durations.
Joshua Steiner, CFA