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Slowdown In The Labor Market?

This morning's weak seasonally adjusted initial jobless claims number should come as no surprise after yesterday's equally abysmal ADP report. Last month, Hedgeye Financials Sector Head Josh Steiner noted that the labor market's seasonal adjustments would shift from a tailwind into a headwind at the beginning of April; we are now beginning to witness the change first hand.

 

 

Slowdown In The Labor Market? - 1

 

 

Some would blame the "Easter effect" and spring break for the stagnant job growth and four-month high in jobless claims. While a fair argument, the bigger picture shows that the labor market is not as bad as it would appear to be on the surface of things. Yes, there is a cool down occurring right now but history shows that this happens during April every year. The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -3.8% lower year-over-year, which is a sequential deterioration versus the previous week's year-over-year change of -5.9%.

 

Slowdown In The Labor Market? - 2

 

Slowdown In The Labor Market? - 3

 

Slowdown In The Labor Market? - 4


April ECB Presser: Tight Credit Conditions Persist

Today’s ECB press conference was largely non-eventful.  Rates were left unchanged, Draghi reiterated that the economic outlook remains weak, inflation expectations are anchored, and credit conditions remain tight. Below we show a chart of the weakening credit lines to households and corporations, which should continue to hamper real growth.

 

April ECB Presser: Tight Credit Conditions Persist - ww. ecb loans

 

Click here to read Draghi’s prepared remarks.

 

There were many questions on Cyprus in the Q&A. Draghi was quick to state that the Cyprus levy is no template for the Eurozone (and acknowledged that Eurogroup head Jeroen Dijsselbloem misspoke on the topic), and that the original ECB proposals for a Cyprus bailout/in did not include a levy.

 

As we discussed yesterday in a post titled “ECB on Hold; EUR Pressured; Slovenia Scares” we think that the uncertainty around the next Italian government, the tail of Cyprus, recent scares over Slovenia as the next country in need of a bailout, and the ECB keeping the interest rate on hold will put downside pressure on the EUR/USD.

 

Our critical quantitative lines on the EUR/USD are outline in the chart below. Beyond immediate term TRADE support of $1.27 we do not see any meaningful support until around $1.22.

 

April ECB Presser: Tight Credit Conditions Persist - ww. eurusd

 

Matthew Hedrick

Senior Analyst


Stimulus: Big In Japan

Following in the footsteps of the Federal Reserve post-2008 financial crisis, the Bank of Japan announced overnight that it would inject $1.4 trillion into the economy over the next two years as a stimulus measure. As a result, the Japanese Yen took a nose dive as the currency is debauched even further and stocks around the globe, including the Nikkei 225 and S&P 500, rose considerably on the news.

 

Stimulus: Big In Japan - NIKKEISPY

 

As you can see in the chart above, the Nikkei 225 has ripped to the upside, posting a +5.2% gain in the last two days alone. Insider buying and selling is inevitable but any kind of easing program put into place by Japan's central bank is bound to make waves in the stock market.


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Morning Reads From Our Sector Heads

Howard Penney (Restaurants):

 

Panera testing donation-based menu item (via Nation's Restaurant News)

 

Brian McGough (Retail):

 

Lululemon Dispatches Employees to Overhaul Offshore Production (via Sports One Source)

 

Kevin Kaiser (Energy):

 

Midstates Petroleum to Acquire Oil-Weighted Properties in the Western Anadarko Basin in Oklahoma and Texas (via Midstates Petroleum)

 

Peyto Exploration and Development Corp. President's Monthly Report (via Peyto)

 

Josh Steiner (Financials):

 

Bond Traders Club Loses Cachet in Most Important Market (via Bloomberg)

 

Fed’s Williams: Bond Purchases May Be Tapered by This Summer (via WSJ)

 

Government Watchdog Faults Regulators Over Foreclosure Review (via NYT Dealbook)

 

 

 


INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS?

Takeaway: Labor conditions in the latest week slowed significantly on a seasonally adjusted basis and slightly on a non-seasonally adjusted basis.

This morning's awful seasonally adjusted initial jobless claims print appears to have been negatively impacted by the Easter week holiday. Taken together with the weak ADP report and the weak Challenger report, the market is clearly developing a bearish bias in the short term around labor conditions. We'll see what tomorrow's river card brings.

 

The non-seasonally adjusted claims number was essentially flat week-over-week. Looking at the trend in the non-seasonally adjusted data, it's still trending better year-over-year, but only just barely. This week's print was better by just 0.5% vs. the same week last year. The trend in this dynamic over the last five weeks has been: -0.5%, -2.4%, -5.8%, -6.1%, -8.9%. Clearly the rate of year-over-year improvement has been slowing notably over the past month. A silver lining is that the trend in rolling NSA claims YoY is less negative, as we show in the second chart of this note. 

 

The bottom line is this: labor conditions aren't as bad as they appear (in the SA numbers), but are, in fact, showing signs of genuine cooling.

 

The Data

Initial jobless claims rose 28k to 385k from 357k WoW. The previous week's number was unrevised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 10.75k WoW to 354.25k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -3.8% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -5.9%

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 1

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 2

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 3

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 4

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 5

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 6

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 7

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 8

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 9

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 10

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 11

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 12

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 13

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 14

 

Yield Spreads

The 2-10 spread fell -6.9 basis points WoW to 160 bps. In 1Q13, the 2-10 spread is averaging 167 bps, which is higher by 25 bps relative to 4Q12.

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 15

 

INITIAL CLAIMS - IS THE LABOR MARKET REALLY AS SOFT AS IT SEEMS? - 16

 

 

Joshua Steiner, CFA


THE M3: TEMPORARY LONGER GONGBEI BORDER HOURS

The Macau Metro Monitor, April 4, 2013

ADDITIONAL TWO HOUR TRIAL OPENING FOR GONGBEI BORDER STARTS TODAY, GOV'T WANTS 24-HR OPERATION Macau Daily Times

The Gongbei border gate on the Zhuhai side is running for longer from today until Saturday (April 6) as a temporary trial measure.  Under the approval, the Gongbei border will open at 6am and close at 1am for three successive days for the Ching Ming Festival, from today onwards.  “We hope to realize 24-hour operations for the border gates, but we have to discuss with other related parties, such as the central government and the Zhuhai side,” Alexis Tam said, a spokeman for the MSAR government.

 



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