CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP

Takeaway: NFP has a 2/3 chance of being up, not down as expected. Meanwhile, claims continue to move lower.

Handicapping Tomorrow

Two months ago we published a report (link) in conjunction with our Macro Team that looked at the predictive power of the ADP report at handicapping the NFP report. In a nutshell, roughly two-thirds of the time the directional move in ADP (i.e. better or worse sequentially) predicts the directional move in NFP. This creates an interesting opportunity in months when ADP goes one way and expectations are for NFP to go the other way. Tomorrow's NFP report represents such a set-up. ADP rose to 230k this month from 213k last month. Meanwhile, expectations are for NFP to shrink from 248k last month to 240k this month. Given that the move in ADP wasn't huge and the expectations for sequential deceleration in NFP aren't profound we wouldn't make too much of the divergence, but given how sensitive Financials are to labor figures, we feel it's worth pointing out.

 

In other news, initial jobless claims remains a juggernaut of sorts. Claims continue to put in new lows and are now at levels below those seen at the apex of the 2005/2006 economic expansion.

 

We'll leave you with the chart below, which shows both how strong the environment is today but also how risky.  

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 9

 

The Data

Prior to revision, initial jobless claims fell 9k to 278k from 287k WoW, as the prior week's number was revised up by 1k to 288k.

 

The headline (unrevised) number shows claims were lower by 10k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -2.25k WoW to 279k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -19.8% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -20.6%

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 2 2

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 3

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 4

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 5

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 6

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 7

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 8

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 10

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 11

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 19

 

Yield Spreads

The 2-10 spread fell -1 basis points WoW to 182 bps. 4Q14TD, the 2-10 spread is averaging 185 bps, which is lower by -14 bps relative to 3Q14.

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 15

 

CLAIMS QUICK READ & THOUGHTS AHEAD OF NFP - 16

 

 

Joshua Steiner, CFA


Jonathan Casteleyn, CFA, CMT

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more