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.
Nuts & Bolts
Prior to revision, initial jobless claims fell 7,000 to 316,000 from 323,000 week-over-week (WoW), as the prior week's number was revised up by 3,000 to 326,000.
The headline (unrevised) number shows claims were lower by 10,000 WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7.25k WoW to 331.75k.
The 4-week rolling average of non-seasonally adjusted (NSA) claims, which we normally consider a more accurate representation of the underlying labor market trend, was -13.6% lower year-over-year (YoY), which is a modest sequential slowdown versus the previous week's YoY change of -15.1%
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