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Takeaway: Fewer people losing their jobs remains the signal from the claims series.

Vertigo

As the chart below shows, rolling initial jobless claims (SA) are now running sub-300k (297k), putting them right in-line with the lows seen in early-2006 at the peak of the last cycle. 

While history shows early-2006 was indeed near the peak of the economic cycle, at that time that wasn't all that clear. In fact, the stock market remained fooled for another ~18 months, not peaking until late Fall 2007. 

There's definitely some volatility in the data brought on by auto manufacturing furloughs, as is there is most years. This is one of the reasons we double check by looking at the NSA data, and on that basis the data remains strong as well (actually stronger this week than last week).

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Credit Cards

Credit Cards remain our favorite long on the improvement in initial jobless claims. We've been vocal in our enthusiasm for Capital One (COF) on the long side amid early signs of a resurgence in loan growth arising from increasing willingness to extend credit to subprime borrowers. So long as claims remain low, the coast is clear on the long side here and we expect both better than expected earnings and think there's good likelihood for some multiple expansion.

The Data

Prior to revision, initial jobless claims rose 18k to 302k from 284k WoW, as the prior week's number was revised down by -5k to 279k.

The headline (unrevised) number shows claims were higher by 23k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -3.5k WoW to 297.25k.

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -12.7% lower YoY, which is a sequential improvement versus the previous week's YoY change of -12.6%

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Yield Spreads

The 2-10 spread rose 0 basis points WoW to 200 bps. 3Q14TD, the 2-10 spread is averaging 204 bps, which is lower by -17 bps relative to 2Q14.

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Joshua Steiner, CFA

Jonathan Casteleyn, CFA, CMT