INITIAL CLAIMS: POSITIVE MOMENTUM IS ALIVE AND WELL

Takeaway: There's no indication of softening in the labor market based on the most recent data.

The One Chart That Best Explains the Situation

The chart below sums up the dynamic in the labor market quite well. It's a raw chart of NSA 1-week claims and it shows the mismatch the labor department's data is currently reflecting. In 2008, 2009, 2010, 2011 and 2013 this last week was one in which claims historically surge, reflecting the seasonal layoffs following black Friday. 2012 was offset by a week making the comparability poor. Just by eyeballing the chart, however, it looks pretty clear to us that the trend of steady improvement remains very much in place. There's no change to our view based on this most recent labor market datapoint.

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The Data

Prior to revision, initial jobless claims rose 70k to 368k from 298k WoW, as the prior week's number was revised up by 2k to 300k.

The headline (unrevised) number shows claims were higher by 68k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 6k WoW to 328.75k.

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -13.1% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -21.2%

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Yield Spreads

The 2-10 spread rose 1 basis points WoW to 255 bps. 4Q13TD, the 2-10 spread is averaging 237 bps, which is higher by 3 bps relative to 3Q13.

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Joshua Steiner, CFA

Jonathan Casteleyn, CFA, CMT