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Takeaway: The labor market just completed its 19th month of sub-330k claims. History suggests we're getting closer to recession.

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims17

Initial claims were strong last week. The seasonally adjusted figure came in at 263k, well below the 330k Rubicon, -14k below the prior week prior to revision, and -8k below expectations. For context, the jobs market just completed its 19th month of strong, sub-330k claims, as the chart below shows. Importantly, as the chart below also shows, the last three cycles saw claims stay below 330k for 24, 45 and 31 months before the economy entered recession. The average duration of those three cycles was 33 months (max: 45, min: 24). That puts us 5 months from the min, 14 months from the average and 26 months from the max. 

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims20

Indexed energy state claims in the chart below expanded in the week ending September 26 while the U.S. as a whole decreased. The spread between the two series increased to 18 from 16 in the prior week.

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims18

The Data

Prior to revision, initial jobless claims fell 14k to 263k from 277k WoW, as the prior week's number was revised down by -1k to 276k.

The headline (unrevised) number shows claims were lower by 13k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -3k WoW to 267.5k.

The 4-week rolling average of NSA claims, another way of evaluating the data, was -11.0% lower YoY, which is a sequential improvement versus the previous week's YoY change of -8.3%

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims2

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims3

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims4

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims5

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims6

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims7

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims8

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims9

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims10

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims11

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims19

Yield Spreads

The 2-10 spread rose 3 basis points WoW to 144 bps. 4Q15TD, the 2-10 spread is averaging 143 bps, which is lower by -11 bps relative to 3Q15.

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims15

INITIAL JOBLESS CLAIMS | 19 MONTHS ON THE FLOOR - Claims16

Joshua Steiner, CFA

Jonathan Casteleyn, CFA, CMT