This morning's labor data doubleheader (July Challenger & Weekly Claims) featured weakness stemming from both the Army and the Energy industry. As the chart below (Hat tip to Christian Drake of our Macro Team) shows, large troop reductions caused a ~50-60k surge in announced layoffs in July. Meanwhile, Energy sector cuts rose to 9k from 0k in June. While we expect the troop count reduction was one-time in nature, our expectations on the energy front are the opposite. In speaking with our Energy Sector Head, Kevin Kaiser, many energy companies are hedged through year-end 2015, implying that later this year/early next year (assuming no bounce in energy) we'll see a second wave of job cuts from Energy.
On the claims side, rolling SA claims bounced nominally W/W (+3k to 270k) but remain at/near frictional lows. Recall that a few weeks ago, claims put in a 42-year low.
Prior to revision, initial jobless claims rose 3k to 270k from 267k WoW, as the prior week's number was unchanged. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -6.5k WoW to 268.25k.
The 4-week rolling average of NSA claims, another way of evaluating the data, was -8.6% lower YoY, which is a sequential improvement versus the previous week's YoY change of -7.8%
The 2-10 spread fell -5 basis points WoW to 154 bps. 3Q15TD, the 2-10 spread is averaging 164 bps, which is higher by 6 bps relative to 2Q15.
Joshua Steiner, CFA
Jonathan Casteleyn, CFA, CMT