INITIAL CLAIMS - THE REAL LABOR MARKET SHOWS ACCELERATING IMPROVEMENT

Takeaway: The momentum in housing and equities is rippling through to the labor market, as NSA jobless claims show significant improvement.

Labor Market Strengthens Further

This past week's NSA (Non-seasonally adjusted) initial jobless claims were better YoY by 9.5%, which is from the 8.0% YoY improvement in the previous week. This print reflects data through March 2, so next week should be the first week that sheds light on whether the sequester is actually having an impact. On a rolling basis (4-wk moving average), NSA claims were better YoY by 4.3%, which was improved from 2.6% in the previous week. These two measures, the YoY change in NSA and rolling NSA claims, are the better indicators of what's really happening in the labor market, and they both indicate the labor market is strengthening.

 

On the SA (seasonally-adjusted) front, the numbers look great. This is what the market is paying attention to. As a reminder, last week was the final week of tailwind for the series and we'll now be gradually shifting from tailwind to headwind over the coming six months. The first chart in the note tells the story well. 

 

The Data

Prior to revision, initial jobless claims fell 4k to 340k from 344k WoW, as the prior week's number was revised up by 3k to 347k. The headline (unrevised) number shows claims were lower by 7k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7k WoW to 348.75k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -4.3% lower YoY, which is a sequential improvement versus the previous week's YoY change of -2.6%

 

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Yield Spreads Remain a Tailwind

The 2-10 spread rose 3.6 basis points WoW to 169 bps. 1Q13TD, the 2-10 spread is averaging 166 bps, which is higher by 24 bps relative to 4Q12.

 

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Joshua Steiner, CFA


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