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Initial Claims Remain Elevated

Initial jobless claims fell 10k last week (14k after the revision) to 418k.  Rolling claims edged down by 3k to 423k.  This week's decline keeps rolling claims in the same band they've occupied for the last eight weeks, still far from the levels required to see unemployment improve.  

On a separate note, USA Today noted earlier in the week that regulators are increasing the pressure to combat fraudulent claims.  The Labor Department estimated that 12% of claims were fraudulent in the 12 months ended March 2011, up from 11% the prior year and roughly 9% in 2008.  Increased scrutiny of these claims could result in a small reduction in the level of claims going forward.   

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - rolling

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - raw

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - nsa

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - s p

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - XLF

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - fed

Bankruptcies Fall 5% YoY in June

Bankruptcy data shows that consumer filings fell 5% YoY in June (compared to -16% YoY in May).  Lower bankruptcies are a positive signal for net charge-offs, since credit card debt is charged-off when a borrower declares bankruptcy without ever being marked as delinquent.

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - bankruptcies

Bankruptcies are not far out of line with their long-term average levels, as the chart below demonstrates.  (The law change in 2005 pulled bankruptcies forward dramatically; this data is shown with a break in the y-axis.)

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - bankruptcies LT

Spreads Widen Slightly to Begin 3Q

The 2-10 spread, which we track as a proxy for bank margins, widened 5 bps in the first week of the quarter.  

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - spreads

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - spreads QoQ

Financial Subsector Performance

The chart below shows the price performance of subsectors over four durations.

JOBLESS CLAIMS FLAT WHILE BANKRUPTCIES SLOW THEIR RATE OF IMPROVEMENT - perf

Joshua Steiner, CFA

Allison Kaptur