INITIAL CLAIMS: RECENT PRESSURE ABATES

Takeaway: The labor market catches its breath this week with modest sequential improvement.

Two Steps Back, One Step Forward ...

Labor market data had been deteriorating steadily for the last 4 weeks in a row. This week it got slightly better. The year-over-year rate of improvement in rolling NSA initial jobless claims accelerated to -5.5% from -5.1%, marking an inflection from the decelerating trend we had been seeing for the previous month. On a one-week basis, the rate of improvement was fairly impressive at -7.9% vs -0.9% the week prior. As a reminder, we monitor deviations from the trendline rate of improvement in claims as the best real-time indicator for labor market turning points. It's important to remember that claims hit a frictional support level of ~300k, so as the data approaches 300k the rate of improvement should be expected to converge towards zero. We're mindful of this, which is why we look for trendline deviations.

 

The Numbers

Initial jobless claims (SA) fell 3k to 336k from 339k WoW, as the prior week's number was unrevised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 2.5k WoW to 338.5k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -5.5% lower YoY, which is a sequential improvement versus the previous week's YoY change of -5.1%

 

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Yield Spreads

The 2-10 spread rose 3 basis points WoW to 242 bps. 1Q14TD, the 2-10 spread is averaging 243 bps, which is higher by 2 bps relative to 4Q13.

 

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Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


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