Claims Headwinds to Persist for Another Two Months
Initial jobless claims fell by 6k last week to 377k. Incorporating the 6k upward revision to the prior week's data (389k vs 383k), claims were lower by 12k. Four-week rolling claims rose 1.75k to 378k. For reference, rolling claims bottomed on a YTD basis at 355k on 2/25/12. The upward drift in the 3+ months since then has been 23k. We would expect another 10-15k in upward drift over the next two months before the trend begins to reverse.
Overall, sentiment around employment remains weak. The most recent jobs report was unequivocally weak and the broader trend in claims has been negative. This trend will continue through July/August before reversing in September.
To be clear, the underlying trend in claims is positive. We look at the YoY trend in NSA claims to avoid the faulty seasonal adjustment factors. NSA claims continue to trend approximately 10% lower on a YoY basis.
Meanwhile, the Yield Curve Continues to Pancake
The 2-10 spread widened 5 bps versus last week to 140 bps as of yesterday. The ten-year yield increased 4 bps to 166 bps. To put this in perspective, if spreads hold where they are now, the 3Q12 sequential change will rival what we saw in 3Q11, an ominous sign for bank margins. With Operation Twist set to end on June 30, all eyes will be on Bernanke at 10am this morning for clues on the next round of curve manipulation.
Financial Subsector Performance
The table below shows the stock performance of each Financial subsector over four durations.
Joshua Steiner, CFA
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