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Takeaway: If history rhymes, we've got 5 quarters of track from here to oblivion.

Below is the 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 

Late-Cycle Strength Rolls On:  Claims this past week were clearly again low at 281k, but the economy is equally clearly late cycle. Once again we'll revisit the key question, which is how long can labor market strength of this magnitude continue?

In the chart below, we show that in the last three cycles, once claims dipped below 330k they remained there for 24 months, 45 months, and 31 months, in the late 1980s, late 1990s/early 2000s, and 2006-2008 period, respectively before the economy went into recession. In the current cycle, claims have been below 330k for 16 months and counting. The average of these last three cycles is 33 months, which would translate to another ~5 quarters of track.

INITIAL CLAIMS | 5 QTRS TO GO - Claims1

Indexed claims in energy heavy states fell in the week ending June 20th while rising for the country as a whole. The spread between the two series in the chart below tightened from 30 to 24.  

The spread compression in the claims series accords with the Challenger Job Cut Announcement data for June which showed energy sector job cut announcements fall to a 7-month low of just 290 while Ex-Energy announcements rose by 6.2K to the highest level in 11-months. 

INITIAL CLAIMS | 5 QTRS TO GO - Claims18 normal  4

INITIAL CLAIMS | 5 QTRS TO GO - Challenger

The Data

Prior to revision, initial jobless claims rose 10k to 281k from 271k WoW, as the prior week's number was unrevised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 1k WoW to 274.75k.

The 4-week rolling average of NSA claims, another way of evaluating the data, was -12.7% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -13.2%

INITIAL CLAIMS | 5 QTRS TO GO - Claims2 normal  3

INITIAL CLAIMS | 5 QTRS TO GO - Claims3 normal  3

INITIAL CLAIMS | 5 QTRS TO GO - Claims4 normal  3

INITIAL CLAIMS | 5 QTRS TO GO - Claims5 normal  3

INITIAL CLAIMS | 5 QTRS TO GO - Claims6 normal  4

Joshua Steiner, CFA

Jonathan Casteleyn, CFA, CMT