INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY

Takeaway: Labor market data softens a bit sequentially (ADP & Claims) and likely augurs for a miss on tomorrow's payroll number.

Still Good, but Less Good

The rate of improvement in the labor market slowed slightly in the latest week as initial jobless claims (NSA, 1-wk) were lower by 7.7% y/y vs an 11% improvement in the prior week. On an NSA rolling basis (4-wk), the rate of improvement slowed to 8.6% from 10.3%. Recall that claims tend to bottom out around 300k (SA), which is roughly where they are now (302k). As such, we expect to see the rate of y/y improvement converge toward zero.

 

Tomorrow 

The slightly weaker than expected ADP number this morning (204k vs 218k last month) coupled with August SA rolling claims being ~8k higher than July suggests there's a good chance that tomorrow's labor market report for August comes in light, especially considering expectations are for a sequential acceleration to 230k from 209k.

 

The Data

Initial jobless claims rose 4k to 302k from 298k WoW. There was no revision to the prior week number. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 3k WoW to 302.75k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -8.6% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -10.3%

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 2

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 3

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 4

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 5

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 6

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 7

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 8

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 9

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 10

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 11

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 12

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 19

 

 

Yield Spreads

The 2-10 spread fell -3 basis points WoW to 188 bps. 3Q14TD, the 2-10 spread is averaging 199 bps, which is lower by -21 bps relative to 2Q14.

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 15

 

INITIAL CLAIMS - AUGUST WEAKENS RELATIVE TO JULY - 16

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 



Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more