Yesterday we erroneously published a comment as part of our Leisure Letter, that read in part “MGM may have difficulty fulfilling its debt obligations and staying compliant with its covenants in 2016.”  This is a misstatement of our position.  In fact, we believe that MGM should not have difficulty fulfilling its debt obligations, and that it should be able to remain compliant with its covenants in 2016.  We regret any confusion this may have caused.  Please feel free to contact us for further clarification.





Cartoon of the Day: The Real Fed Policy

Cartoon of the Day: The Real Fed Policy - FED cartoon 12.18.2014

Market euphoria is in full force following yesterday's Fed meeting.

Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration

Takeaway: This week we take a look at energy state jobless claims trends and their relative exposure to the collapse in crude.

Below is the detailed breakdown of this morning's initial claims data from Joshua Steiner and the Hedgeye Financials team. If you would like to setup a call with Josh or Jonathan or trial their research, please contact 



Oil has been in the news recently in case you haven't noticed. It will be important to watch state level initial jobless claims going forward. Why? Energy-heavy states are at risk of higher job loss due to the collapse in crude oil prices.


With that in mind, we're going to start posting occasional updates on how these states are faring from a labor market standpoint.


Our Energy Sector Head, Kevin Kaiser, sent a note out internally a while back flagging an article that showed state level labor market concentrations tethered to energy. The key chart from that note is shown below. The big energy states in the US (in alphabetical order) are Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia and Wyoming. For those interested in the article, it can be found here.


Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration - States with Energy Concentration



A lot of people don't realize that the Labor Dept publishes state-level initial jobless claims data on a weekly basis, but on a one-week lag. Here's a look at the trend in these energy-heavy states based on the most recent week of data.


There's some good news and some potentially bad news. The good news is that if you look at the rate of change in week-over-week NSA initial claims in these energy heavy states, it averages 1.88%. That compares with the national average of 1.90%. This is good. It suggests that, for now, energy states are not diverging from the national trends.


The potentially bad news, however, is that if you look at the chart above, you'll notice that some of these energy states are more exposed to Oil & Gas Operations (Alaska, as an example). Alaska actually saw the highest w/w change in claims of the energy states. That said, the other state that saw claims rise faster than the national average was West Virginia, which has a comparatively small oil-based labor market relative to a large coal-mining labor market. It's also worth repeating that one week of data isn't enough to draw any firm conclusions.


As we move forward, we'll build out this dataset to see if more concrete conclusions can be drawn, but for now we thought we'd start with an opening salvo at what is one of the big potential black swans for an otherwise strong domestic labor market.  


Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration - energy bar chart


The Data

Prior to revision, initial jobless claims fell 5k to 289k from 294k WoW, as the prior week's number was revised up by 1k to 295k.


The headline (unrevised) number shows claims were lower by 6k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -0.75k

WoW to 298.75k.


The 4-week rolling average of NSA claims, another way of evaluating the data, was -12.9% lower YoY, which is a sequential improvement versus the previous week's YoY change of -8.1%


Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration - 2 normal  1


Jobless Claims: Watching the Energy States for Signs of Labor Market Deterioration - 3




Joshua Steiner, CFA


Jonathan Casteleyn, CFA, CMT

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PODCAST | Oversupply of Underperformance: How Epic Short-Term Performance Pressure Affects Markets


In the Q&A portion of today’s Morning Macro Call, Hedgeye CEO Keith McCullough discusses performance pressure on asset managers,  volatility in the Russell 2000,  and whether recent market activity compares to what occurred in the late-90’s.


Keith's Macro Notebook 12/18: Oil | Russia | Europe

Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.

Daily Trading Ranges, Refreshed [Unlocked]

This is a complimentary look at Hedgeye's proprietary buy and sell levels on major markets, commodities and currencies sent to subscribers every weekday morning by CEO Keith McCullough. It was originally published December 18, 2014 at 07:40. Click here to learn more and subscribe.

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