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Initial claims rose 13k  to 472k last week (15k net of the revision of last week's reading), nearly wiping out last week's improvement. This drove the rolling average up 3.25k to 466.75k, its highest level since March.  Overall, claims continued to track roughly in the 450-470k range they have occupied for the last six months.  For unemployment to materially improve, claims need to fall to the 375-400k range.  Other than extremely weak sentiment going into tomorrow's unemployment report, there don't seem to be any positive signals.  

INITIAL JOBLESS CLAIMS UP 13K = NO SIGNS OF IMPROVEMENT - rolling

Below we chart the raw claims data. 

INITIAL JOBLESS CLAIMS UP 13K = NO SIGNS OF IMPROVEMENT - raw

 

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.

INITIAL JOBLESS CLAIMS UP 13K = NO SIGNS OF IMPROVEMENT - census chart

 

Below, we chart US equity correlations with Initial Claims, the Dollar Index, and US 10Y Treasury yields on a weekly basis going back 3 months, 1 year, and 3 years.Not surprisingly, Consumer Discretionary has the largest inverse correlation to Initial Claims (r-squared = 0.74) on a 1-year basis. On the flip side, it is a surprise to see that the Financials have the second lowest inverse correlation to Initial Claims (r-squared = 0.36) on a 1-year basis.

INITIAL JOBLESS CLAIMS UP 13K = NO SIGNS OF IMPROVEMENT - 1

 

Joshua Steiner, CFA

Allison Kaptur