This morning we got a reprieve on the claims front and added tailwind out of February retail sales. Initial unemployment claims fell 29k last week to 469k from 498k the week prior (revised up 2k). Consequently, the 4-week rolling claims number dropped 3.5k to 470.8k from 474.3k.
This latest print, while positive on the margin, isn't enough to keep to push claims back into our 3 standard deviation channel. As pointed out a few days ago in our report analyzing companies' correlation with claims we expect claims to move lower, back into our 3 sigma channel in the coming months. Weather was an aberration in February, which caused claims to be artificially high. Moreover, going forward, we expect Census hiring to begin to exert downward pressure on claims this month and lasting through May/June.
Separately, February retail sales numbers are out this morning, and our retail analyst Brian McGough thinks they are much stronger than expected, and would have been even stronger without the heavy February snowfall totals. This bodes well principally for volume/transaction-based companies like AXP, MA, V and to a lesser extent DFS.
Joshua Steiner, CFA
