INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS?

Takeaway: We continue to expect seasonality tailwinds through February, but are we also seeing some early signs of trouble in the real labor market?

Seasonally-adjusted vs. Non-seasonally-adjusted

Seasonally-adjusted initial jobless claims fell by 8k last week to 355k. There was no revision to the prior week's data. On a 4-week rolling basis, claims rose 3.25k to 371k. We know that last week's print was affected by Hurricane Sandy, but based on comments from Labor Department officials, we don't know whether the affect was positive or negative. Some states saw an increase in claims because Sandy left them out of work, while in other states there was such widespread damage that it inhibited people's ability to file for new claims.

 

The non-seasonally adjusted data would be subject to the same Sandy distortion. This week's non-seasonally adjusted claims were higher by 15k. We like to look at the YoY change in rolling NSA claims for a more accurate read on the trends. This week that YoY improvement slowed to -6.9% from the prior two readings of -8.8% and -9.1%. This slowdown is worth keeping an eye on, as it may be an early indication that the real labor market is starting to show signs of weakening. However, we would emphasize that the distortions from Sandy have us cautious about putting too much emphasis on the numbers at this time.

 

On a seasonally-adjusted basis, we expect to see claims continue to benefit from a seasonality tailwind through February, consistent with the last three years. We illustrate these various dynamics in the charts below.

 

It's also worth briefly noting that strength in last month's non-farm payroll report is a statistical aberration. We note the difference in the slope of this year vs the past three. While it's difficult to forecast any one data month accurately, we would think it quite likely that the November non-farm payroll number is down MoM vs. October.

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 1

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 2

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 3

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 4

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 5

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 6

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 7

 

In the chart below we're profiling the YoY change in rolling NSA initial jobless claims series. Note the similarity of the slope of the trendline from last year vs. this year, and note the upward move of the last data point well above the trendline. While there have been comparable moves earlier this year, they were generally in response to aberrations in the year-earlier data, whereas this week's move is against a relatively normalized baseline.

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 8

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 9

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 10 

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 11

 

INITIAL JOBLESS CLAIMS: SANDY DISTORTS, BUT ARE WE SEEING EARLY SIGNS OF LABOR MKT WEAKNESS? - 12

 

Joshua Steiner, CFA

 

Robert Belsky


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more