Rolling Claims Hit a New YTD High Despite Improvement in Reported Claims
Initial unemployment claims fell 31k last week (27k net of the prior week's revision up to 504k). Rolling claims rose to 486.75k, an increase of 3.25k week over week and a new year-to-date high. While the raw claims number today was a step in the right direction, there is a long way to go before reaching the range of 375-400k where unemployment can begin to meaningfully improve.
To reiterate, our firm is of the strong view that US economic growth is going to slow markedly in the back half of this year and into 2011. We think this will keep a lid on new hiring activity as management teams focus on cost control. All of this raises the risks that a prospective slowdown in GDP will precipitate an incremental slowdown in hiring/pickup in firings, which will, in turn, further pressure growth. We continue to look to claims as the best indicator for the job market, as they are real time and inflections in the series have signaled important turning points in the market in the past.
In the table 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.
As a reminder, May was the peak month of Census hiring, and it should now be a headwind through September as the Census continues to wind down.
Joshua Steiner, CFA