There's not much to get excited about in this morning's claims print. Initial unemployment claims came in at 444k, unchanged from last week, although after upwardly revising last week's print by 4k, this week's print is being cited as a 4k improvement sequentially. On a 4-week rolling basis, the improvement was meaningful, falling 9k to 450.5k.
As we pointed out last week, we remain concerned that without significant improvement in claims, a leading indicator, there will be no meaningful improvement in unemployment, a lagging indicator. By extension, without improvement in unemployment it will be difficult for credit costs to return to what are considered "normalized" levels. At a minimum, a return to those normalized levels will be delayed. Remember, for unemployment to fall meaningfully, initial claims need to fall to a sustained level of 375-400k. We remain 45-70k above that level - roughly where we've been for five months now.
As a reminder around the census, May is the expected peak employment month. Beginning next month the census will become a headwind for job creation.
The following chart shows the census hiring timeline. If the past two cycles are an appropriate model for this year's census, we should start to see Census employment draw down as we move into June, creating a headwind for employment.
Joshua Steiner, CFA
Allison Kaptur
