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Takeaway: Claims persist below the 300k Maginot Line, but, like Taleb's Turkey approaching Thanksgiving, real risk rises while perceived risk falls.

Consider a turkey that is fed every day. Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race 'looking out for its best interests,' as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief. 

- Nassim Taleb, The Black Swan

Just like Taleb's Turkey, initial jobless claims appear on solid footing below 300k and the longer they stay there, the more comfortable/complacent markets tend to get. After all, the bull market is now six and half years old and we're at/near full employment with an accomodative Fed. The reality, however, is that we're drawing inevitably closer to Thanksgiving day ... and the market is, of course, the Turkey.  

Initial jobless claims came in at 271k last week, falling for the first time since hitting a 42-year low in the week ending July 18. Meanwhile, the year-over-year change in NSA claims continues to trend towards zero. That figure deteriorated slightly last week from -9.9% to -9.5%. 

In energy states, initial jobless claims maintained their position versus the country as a whole in the week ending August 15. The spread between those two indexed series in the chart below remained stable at 11. With the price of oil hitting new lows, we expect this spread to widen going forward.

INITIAL JOBLESS CLAIMS | TALEB'S TURKEY - Claims18

The Data

Initial jobless claims fell 6k to 271k from 277k WoW as the prior week's number was not revised.

The 4-week rolling average of seasonally-adjusted claims rose 1k WoW to 272.5k.

The 4-week rolling average of NSA claims, another way of evaluating the data, was -9.5% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -9.9%

INITIAL JOBLESS CLAIMS | TALEB'S TURKEY - Claims2

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INITIAL JOBLESS CLAIMS | TALEB'S TURKEY - Claims11

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Yield Spreads

The 2-10 spread rose 4 basis points WoW to 150 bps. 3Q15TD, the 2-10 spread is averaging 158 bps, which is consistent with 2Q15.

INITIAL JOBLESS CLAIMS | TALEB'S TURKEY - Claims15

INITIAL JOBLESS CLAIMS | TALEB'S TURKEY - Claims16

Joshua Steiner, CFA

Jonathan Casteleyn, CFA, CMT