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Jobless Claims Better Week Over Week, But Remain at a Level Inconsistent with Material Improvement

Initial claims fell week over week by 19k after upwardly revising the prior week by 4k, suggesting the actual improvement was 15k. More important to us is that the level of jobless claims - 457k - remains right in line with its trend year-to-date in the 450k-460k range. As a reminder, this level is too high for unemployment to materially improve. The level would need to be in the 375k-400k range by our estimates for unemployment to make real headway in the right direction. On a rolling basis, claims fell by 1.5k to 463k from 464.5k last week. On the margin, this morning's data is slightly positive, but it's only a small step in the right direction so we'll reserve our enthusiasm for the time being.

CLAIMS LOWER VS LAST WEEK BY 15K NET OF REVISION BUT STILL WAY TOO HIGH FOR UNEMPLOYMENT TO IMPROVE - rolling

Below we chart the raw claims data. 

CLAIMS LOWER VS LAST WEEK BY 15K NET OF REVISION BUT STILL WAY TOO HIGH FOR UNEMPLOYMENT TO IMPROVE - raw

In the table below, we show the correlations of initial claims to U.S. equities. Consumer Discretionary (XLY) and Consumer Staples (XLP) have the highest inverse correlation on a one-year basis (r-squared = 0.76 and 0.75, respectively). Surprisingly, the Financials have the second lowest inverse correlation to initial claims on a one-year basis (r-squared = 0.40).

CLAIMS LOWER VS LAST WEEK BY 15K NET OF REVISION BUT STILL WAY TOO HIGH FOR UNEMPLOYMENT TO IMPROVE - 1

As a reminder, May was the peak month of Census hiring, and it should now be a headwind to jobs from here as the Census winds down.

CLAIMS LOWER VS LAST WEEK BY 15K NET OF REVISION BUT STILL WAY TOO HIGH FOR UNEMPLOYMENT TO IMPROVE - census chart

Joshua Steiner, CFA

Allison Kaptur