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Takeaway: New Jersey remains in a shambles, while New York and Pennsylvania are renormalizing. Overall, the labor market appears to remain on track.

Getting Back to Normal

Hurricane Sandy's effects continued to fade in this latest jobs report, mirroring trends we saw after Hurricane Katrina. At this point, initial claims have retraced 64% of their increase from the storm. New Jersey initial jobless claims remain extremely high. For reference, in the latest round of state level data, NJ accounted for some 45,631 new jobless claims, which represented 11.3% of total claims (vs. NJ being 2.8% of the U.S. population). This was actually up from the previous week, in which NJ represented 9.6% of total claims. New York saw claims fall sharply, but still represented 8.1% of all claims vs. being 6.2% of the population. Similarly, Pennsylvania accounted for 6.0% of claims while being 4.0% of the population. If we tally those differences, we find that these three states represent an overstatement of claims on the order 12.4%. If we adjust the numbers for this, we find that the "normalized" claims level is closer to 370k, which is slightly above where claims were just prior to the storm (361k). 

The Numbers

Initial jobless claims fell 17k last week to 393k, but after incorporating the 6k upward revision to last week's data, claims were lower by 23k. Rolling claims, meanwhile, were higher by 7.5k to 405k. On a non-seasonally adjusted basis, claims fell 47k. 

Bottom Line

We think 370k is a reasonable approximation of where Sandy-adjusted claims are currently, but this estimation could be off by +/- 10k. The rolling claims number going into the storm was actually 371k (higher than the 361k single-week print cited in the chart below), suggesting that over the next few weeks we should expect claims to return to their pre-storm trendline. Obviously, there remains great uncertainty around the resolution of the Fiscal Cliff, which is the greatest near-term threat to the labor market, but, at least so far, it doesn't appear to be altering the trajectory. 

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - Sandy v Katrina

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - weekly claims state level  2

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - Seasonality

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - NSA Rolling YoY by year

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - Raw

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - rolling

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - NSA

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - rolling NSA

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - S P

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - Fed

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - NSA YoY

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - recession

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - claims linear

Yield Spreads

The 2-10 spread fell 5 bps WoW to 136 bps. 4QTD, the 2-10 spread is averaging 1.42%, which is up 5 bps relative to 3Q12.   

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - 2 10 QoQ

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - 2 10 spread

Financial Subsector Performance

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

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - Scoreboard

INITIAL CLAIMS: UNDERLYING TRENDS APPEAR RESILIENT - Companies

Joshua Steiner, CFA

Robert Belsky