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MACRO MEDLEY

The impact of the Government shutdown in October continues to manifest across reported, domestic macro data in November. 

This morning’s Durable and Capital Goods data for October reflected an expected retreat in New Orders with a slowdown across the various index aggregates while consumer confidence, universally, has remained in hangover mode through November after the discrete negative inflection into and through the latest iteration of congressional dystopia. 

Next week’s ISM data for November should provide a less noisy read on the trend in goods demand and manufacturing activity into year end.  Confidence data over the next six weeks, and whether we can break the current inertial downward trend, as we as we move increasingly past October's budget resolution and increasingly towards the next budget shutdown is of (obvious) import for year-end consumerism.     

Meanwhile, this morning’s real-time labor market data showed further strengthening as non-seasonally adjusted claims reflected steady improvement and headline claims printed its third best number since the start of the financial crisis. 

Below is the breakdown of this morning's claims data from the Hedgeye Financials team.  If you would like to setup a call with Josh or Jonathan or trial their research, please contact 

-Hedgeye Macro

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - Consumer Confidence

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - Durable Goods Oct

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Labor Leads the Long End of the Curve

Hurricane Sandy continues to distort the year-over-year trends in the labor market. As such, we are relying on the SA data as well as the 2-year comps on the NSA data. On both fronts, the data is very strong this week. The two-year comp shows claims down by 17.5%, which is the fastest rate of improvement in the last two months.

On the seasonally-adjusted data, the headline print of 316,000 marks the third lowest print since the start of the Financial Crisis, and is only 8k shy of the low.

By all accounts it would appear that the labor market continues to make steady progress in spite of the naysayers who'll tell you otherwise. Not only is an improving labor market conducive to lower credit costs for Financials, but it also exerts upward pressure on the long end of the yield curve.

We showed recently just how correlated the banks are with the 10-year treasury yield, so now you've got both labor and spreads working in tandem to push bank stocks higher. For more details, see our note from 11/22 "#Rates-Rising: A Current Look at Rate Sensitivity Across Financials" - please contact sales@hedgeye if you are interested in that research. 

Nuts & Bolts

Prior to revision, initial jobless claims fell 7k to 316k from 323k WoW, as the prior week's number was revised up by 3k to 326k.

The headline (unrevised) number shows claims were lower by 10k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7.25k WoW to 331.75k.

The 4-week rolling average of NSA claims, which we normally consider a more accurate representation of the underlying labor market trend, was -13.6% lower YoY, which is a modest sequential slowdown versus the previous week's YoY change of -15.1%

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 1

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 2

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 3

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 4

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 5

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 6

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 7

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 8

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 9

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 10

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 11

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 12

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 13

Joshua Steiner, CFA

Jonathan Casteleyn, CFA, CMT