Initial Claims: Two Steps Back, One Step Forward...

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

Editor's note: This is a complimentary excerpt from a research note written by Hedgeye's Financials team. For more information on how Hedgeye can help you click here or ping

Recent Pressure Abates

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.

Initial Claims: Two Steps Back, One Step Forward... - stein2

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%

Initial Claims: Two Steps Back, One Step Forward... - stein1

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