Initial Claims Fall 10k
The headline initial claims number fell 10k WoW to 385k (12k before a 2k downward revision to last week’s data). Rolling claims fell 7k to 384.5k. On a non-seasonally-adjusted basis, reported claims fell 34k WoW.
We have been looking for claims in the 375-400k range as the level that can begin to bring unemployment down. We have now had three weeks inside of this range. If this level continues to hold, 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 start to 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 Tightens 12 bps
We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 1Q is tracking 41 bps wider than 4Q. The current level of 264 bps is slightly tighter than last week (278 bps).
Financial Subsector Performance
The table below shows the stock performance of each Financial subsector over four durations.
Joshua Steiner, CFA