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Takeaway: January Challenger job cuts rose +42% Y/Y. While job cuts continue in energy, they've also emerged in retail.

Initial Claims | The Labor Market is Getting Challenged - Claims1

Challenger Job Cut announcements moved up notably in January, as the below chart from our Macro Team shows. Energy jobs cut popped to 20,103 which is in-line with the fastest rates of job loss in Energy we've seen since the beginning of Energy's decline. While the energy sector's woes have been ongoing for some time, the newer development is the deterioration of non-energy labor conditions. Announced job cuts ex-energy were 55,011 in January, which brings the total announced cuts to 75,114, which is the highest level by far in the post crisis period, notwithstanding the one-off military related labor adjustment in July 2015. To put this in perspective, that brings total announced layoffs to +42% Y/Y in January with no underlying distortions present in the data. Outside of Energy, Retail was the second biggest loser with job cuts rising 15.5k Y/Y.

This emergent trend of worsening labor conditions is also manifest in the initial jobless claims data. Seasonally adjusted claims continued their upward trend last week, rising by 8k from the revised 277k to 285k, and the year-over-year rate of change in rolling NSA claims has essentially converged to zero, deteriorating from -3.2% in the previous week to just -0.8% in the latest week.

Initial Claims | The Labor Market is Getting Challenged - challenger

The Data

Prior to revision, initial jobless claims rose 7k to 285k from 278k WoW, as the prior week's number was revised down by -1k to 277k.

The headline (unrevised) number shows claims were higher by 8k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 2k WoW to 284.75k.

The 4-week rolling average of NSA claims, another way of evaluating the data, was -0.8% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -3.2%

Initial Claims | The Labor Market is Getting Challenged - Claims2

Initial Claims | The Labor Market is Getting Challenged - Claims3

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Initial Claims | The Labor Market is Getting Challenged - Claims19

Yield Spreads

The 2-10 spread was flat WoW at 116 bps. 1Q16TD, the 2-10 spread is averaging 118 bps, which is lower by -18 bps relative to 4Q15.

Initial Claims | The Labor Market is Getting Challenged - Claims15

Initial Claims | The Labor Market is Getting Challenged - Claims16

Joshua Steiner, CFA

Jonathan Casteleyn, CFA, CMT