INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE?

Takeaway: The real labor market continues to improve, albeit modestly. California is to blame for the last three weeks of volatility.

Blame California

Three weeks ago, California was omitted causing initial jobless claims to drop 28k. Two weeks ago, California was double-counted causing claims to rise 46k. Last week, California was back to normal so claims dropped 23k. Net net, in the last three weeks, the 4-week rolling average for seasonally-adjusted jobless claims has gone from 364k three weeks ago to 368k in the most recent week. 

 

As we show in the first chart, the trend in claims since the start of September is lower. This is consistent with our expectation, and we would expect to continue to see claims move steadily lower through February 2013, owing to the faulty seasonal adjustment factors that have been warping the data for the last 3.5 years. The same distortion occurs in non-farm payrolls, incidentally. This perception of a steadily improving labor market should be a tailwind for credit-sensitive financials.

 

What's Really Going On?

Looking past the distorted SA numbers, the reality is that the labor market is still improving in spite of the recent spate of headlines about sizeable layoffs in the private sector. We measure this by evaluating the YoY change in rolling non-seasonally-adjusted initial jobless claims. This morning's print brought that series to -8.4%, slightly worse than the prior week's print of -10%. A larger decline in YoY claims is, of course, better. We don't put too much emphasis on one or two or even three weeks of data, but if we see the 8.4% YoY change from this morning continue to converge toward zero at a rapid rate over the next 3-4 weeks, that will be indicative of a real problem starting to take hold in the labor market. Interestingly, the rest of the market will be unlikely to notice this since the SA tailwinds will appear to make the data go sideways.

 

The Data

Last week initial claims fell 19k to 369k. After incorporating a 4k upward revision to the prior week's data, claims fell 23k. Rolling claims rose 1.5k WoW to 368k. The non-seasonally adjusted series fell 20k to 343k. The NSA YoY change was -8.4%.

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Seasonality

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Raw

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Rolling

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - NSA claims

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - NSA rolling

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - S P

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Fed

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - YoY

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Rolling  Linear

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Initial Claims Linear

 

Yield Spreads

The 2-10 spread fell 4 bps WoW to 150 bps. So far 4QTD, the 2-10 spread is averaging 1.45%, which is up 8 bps relative to 3Q12.  

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - 2 10

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - 2 10 QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over multiple durations.  

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Subsector

 

INITIAL JOBLESS CLAIMS: IS THE LABOR MARKET GETTING BETTER OR WORSE? - Companies

 

Joshua Steiner, CFA

 

Robert Belsky

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more