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Initial claims rose 9k to 417k WoW (+5k after the revision to the prior week).  The Labor Department noted the Verizon strike as a factor in the last two weeks of claims, accounting for "at least 12,500" claims two weeks ago and "at least 8,500" claims this week.  Net/net, the Verizon strike represented a tailwind of 4k in today's print, and the +9k print is in spite of this.  

We have been noting a divergence in the usually-tight correlation between the S&P and initial claims, suggesting that claims would move higher, the S&P would snap back, or some combination.  We continue to expect claims to back up further to close this gap, based primarily on Challenger job cuts as well as the layoffs that have already been announced. If all the mean reversion comes on the claims side claims will rise to ~475k. This would reflect, and cause, a significant slowdown in US economic growth expectations consistent with our Macro team's call.  

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - rolling

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - raw

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - NSA

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - s p

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - XLF

Margins under Pressure 

We track the 2-10 spread as a proxy for bank margin pressures.   We will have a detailed report coming out on the impact to NIM from recent yield changes, which will quantify the impact across the big banks.  Stay tuned. This week's spread level of 207 bps is 10 bps wider than the previous week. 

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - spread

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - spreads QoQ

The chart below shows performance by subsector.

INITIAL CLAIMS RISE 9K, ROLLING AVERAGE RISES WOW - perf

Joshua Steiner, CFA

Allison Kaptur