The latest NSA initial claims data grew on a Y/Y basis for the first time in a long time. While the incease was small at +2%, it's the first time since 2012 this has happened. Prior to 2012, you'd have to go back to 2007 to find the last time claims were rising. Initial claims are still at a low level in absolute terms, but rate of change matters. We wrote about this dynamic in detail back in February 2015, HERE: INITIAL CLAIMS: COGNITIVE DISSONANCE & MICE.
Alternatively, in the last three cycles, claims have stayed below 330k for 24, 45, and 31 months before recession set in (33 months, on average). The current sub-330k run is now in its 27th month. That puts us 3 months past the minimum, 6 months from the 33-month average, and 18 months shy of the 1990s record-setting expansion.
The Data
Initial jobless claims fell 16k to 278k from 294k WoW. The prior week's number was not revised. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 7.5k WoW to 275.75k.
The 4-week rolling average of NSA claims, another way of evaluating the data, was 2.2% higher YoY, which is a sequential deterioration versus the previous week's YoY change of -1.7%
Yield Spreads
The 2-10 spread fell -4 basis points WoW to 96 bps. 2Q16TD, the 2-10 spread is averaging 103 bps, which is lower by -5 bps relative to 1Q15.
Joshua Steiner, CFA
Jonathan Casteleyn, CFA, CMT