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Initial Claims Drop 8k (9k after revision)
Initial jobless claims fell 8k (9k net of last week's revision) to 409k. Last week, the Department of Labor noted that at least 8,500 claims were due to the Verizon strike, so this week's claims are flat WoW excluding the VZ contribution. Our analysis has shown that a level of 375-400k is necessary to move unemployment lower, so today's print represents yet another week of the labor market treading water.
We have been noting for several weeks that jobless claims and the S&P - which usually track closely together - have diverged recently. If all the mean reversion comes from claims moving higher, that implies a coming claims level of 450-475.
Challenger announced job cuts for August were released yesterday. The level fell to 51k from 66k in July. On a YoY basis, August is 47% higher than last year, compared to +60% YoY in July.
2-10 Spread Remains Under Pressure
The 2-10 spread hit a level of 2.02 yesterday and is currently running at an average level of 2.30 for the quarter. This is dramatically tighter than 2Q, which saw an average level of 2.64.
The chart below shows the performance of financial stocks by subsector.
Joshua Steiner, CFA
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