Initial claims this week fell 21k (18k net of the revision). This positive print continued the volatile pattern of the last four weeks, in which the week-over-week change has been more than 15k up or down each week. The four-week rolling average, which removes this volatility, decreased by 1k to 466k. For another week, claims remain in the 450-470k range they've occupied for most of the year, well above the 375-400k range needed for unemployment to materially improve.
Below we chart the raw claims data.
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 = 0.70) 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 = 0.27) on a 1-year basis.
As was noted in last Friday's unemployment report, May was the peak month of Census hiring, and it should be a headwind to jobs from here as the Census winds down.
Joshua Steiner, CFA