INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD

Takeaway: After a brief misfire last week, the labor market appears to again be moving in the right direction. YTD trend-line acceleration continues.

Labor Market: Back to the Races

After taking a breather last week, the labor market came roaring back this week. Taking a look at the YoY trend in NSA initial claims over the last five weeks, they look like this (newest to oldest): -8.9%, -1.3%, -10.5%, -9.7%, -12.1%. That is an extraordinarily strong run. The real takeaway, however, remains that the YoY rate of improvement in rolling NSA claims continues to accelerate in 2013. This is different than what we've seen in the prior three years. The chart below shows this. The black dotted line shows that the slope in the rate of claims improvement is negative for 2013, whereas 2010, 2011 and 2012 all had positive slopes (a negative slope in this instance is better as it means the rate of improvement is accelerating).

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 2

 

To reiterate our comments from last week, we have subscribed to a simple philosophy since Lehman Brothers. We consider three macro factors paramount in gauging the overall direction for the sector: labor, housing and the Fed. On that score, YTD all three factors had been moving in the right direction.We continue to view labor and housing as moving in the right direction from an intermediate and longer-term standpoint. The Fed, however, now seems the odd man out, and in the short-term we continue to expect weakness. 

 

Contrary to the prior three years, however, where it was unclear whether the weakness constituted a falling knife or buying opportunity, this time around, we would view any weakness as a buying opportunity for those with a horizon beyond a few weeks. Our basis is primarily the ongoing recovery in both housing and labor. Moreover, a steepening curve is obviously a good thing for lenders, even if it retards some of the progress we've seen in housing.

 

The Data

Prior to revision, initial jobless claims fell 20k to 340k from 360k WoW, as the prior week's number was revised up by 3k to 363k.

 

The headline (unrevised) number shows claims were lower by 23k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -0.5k WoW to 339.5k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -7.6% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -8.5%

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 1

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 3

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 4

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 5

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 6

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 7

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 8

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 9

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 10

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 11

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 12

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 13

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 14

 

Yield Spreads

The 2-10 spread rose 14.5 basis points WoW to 170 bps. 2Q13TD, the 2-10 spread is averaging 153 bps, which is lower by -14 bps relative to 1Q13.

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 15

 

INITIAL CLAIMS: LABOR MARKET RESUMES FULL STEAM AHEAD - 16

 

Joshua Steiner, CFA

 


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more