This is an excerpt of a research note published earlier today.
"For as this appalling ocean surrounds the verdant land, so in the soul of man there lies one insular Tahiti, full of peace and joy, but encompassed by all the horrors of the half-known life. God keep thee! Push not off from that isle, thou canst never return!" - Herman Melville, Moby Dick
The labor market appears to be the "insular Tahiti" Melville speaks of, surrounded by an appalling ocean of miserable data. Evidence continues to mount that the consumer is getting increasingly squeezed on the back of rising costs (commodities +11.6% YTD) and stagnant wages (personal income is +1.9% YTD). What's an investor to do?
Our take is that investors should stick with claims as their weathervane. It's been a prescient indicator of turning points, marking both the top and bottom of the last cycle clearly and in a timely manner.
Along those lines, rolling initial jobless claims (NSA) were 9.0% lower than at the same point last year, which was in-line with the trend over the past 5 weeks (-9.8%, on average). The 9.0% improvement marks a slight deterioration vs the prior week's 10.1% improvement but isn't anything we'd get overly excited about.
Prior to revision, initial jobless claims fell 0k to 312k from 312k WoW, as the prior week's number was revised up by 2k to 314k.
The headline (unrevised) number shows claims were lower by 2k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 2k WoW to 314.25k.
The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -9.0% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -10.1%
Joshua Steiner, CFA
Jonathan Casteleyn, CFA, CMT