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Takeaway: Last week's labor market soft patch proved short-lived as this week's data has resumed its pace of steady improvement.

Editor's note: This is an excerpt from Hedgeye Risk Management research. For more information and to learn how to join the Hedgeye Revolution click here.

INITIAL CLAIMS: CHUGGING ALONG - jobs3

2013 in Review

With all but one week of 2013 now in the books, the labor data is showing a non-seasonally adjusted year-over-year improvement of 8.2% on a full-year basis. For comparison, 2012 was better by 8.1% versus 2011. This morning's data point showed a 9.0% improvement y/y while the rolling 4-wk average is better by 10.2%. By most accounts the labor data remains strong and shows ongoing improvement. Last week we had flagged a speed bump in the data, but this morning's numbers suggest that a speed bump may have been all that it was.

We continue to expect that the strengthening labor market data will exert ongoing upward pressure on long-term rates. This morning the 10-year treasury yield is at 2.99%, just one basis point away from its September 5 high. We've demonstrated how bank stocks are very positively correlated to 10-year yields while homebuilders are very negatively correlated. For more on that, see our publication from 11/22/13 entitled #Rates-Rising: A Current Look at Rate Sensitivity Across Financials. (Ping sales@hedgeye.com for access).

The Data

Prior to revision, initial jobless claims fell 41k to 338k from 379k week-over-week (WoW), as the prior week's number was revised up by 1k to 380k.

The headline (unrevised) number shows claims were lower by 42k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 4.25k WoW to 346.75k.

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -10.2% lower YoY, which is a sequential improvement versus the previous week's YoY change of -7.7%.

INITIAL CLAIMS: CHUGGING ALONG - stein2

INITIAL CLAIMS: CHUGGING ALONG - stein1