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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here. |
CPI certainly made headlines yesterday, and largely as anticipated, we see inflation under control except for the lagging OER, which is tracking the decline of other components.
What caught our attention more was the high-frequency unemployment claims data. It's important to note that employment significantly disrupts 401(k) systematic flows. Simply put, if you're unemployed, you're not adding to your retirement funds, which means you're not buying at any price. In fact, you might become a net seller if finances become tight. Employment offers the most direct connection between passive flows and the macro landscape.
While it's not setting off alarm bells, there's been a consistent rise in initial claims, though still comfortably below the crucial 300,000 mark. For the week ending August 5, the advance figure for seasonally adjusted initial claims was 248,000, up by 21,000 from the prior week's unrevised level of 227,000. The 4-week moving average stood at 231,000, up 2,750 from the previous week's unrevised average of 228,250. With the labor force growing by only 400,000 workers in the past three months, the employment market has had little difficulty absorbing new entrants despite rising claims. However, with employment rising by almost exactly the same amount, we're finely balanced between the two. Any further increase in claims is likely to begin manifesting as a rising unemployment rate.
Missouri saw the most significant increase with +2,644 claims, primarily in the auto industry. Notably, GM, Ford and Stellantis (Chrysler) have a workforce of 177,000 in the state. We know Ford can't sell the F150 Lightning, and we know Jeep can't sell much of anything at the moment. Likewise, the liquidation of Yellow Freight (YELL) will be adding significantly to this total. We'll be monitoring this closely.
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