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Initial unemployment claims fell 1k last week to 472k (6k after revising the prior week). Rolling claims fell 2.5k to 485.5k. For perspective, rolling claims are roughly 75-100k higher than they need to be in order for unemployment to improve.

Our firm remains of the strong view that US economic growth is going to continue 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.

Rolling Claims Improve Slightly, but Do Little to Counter the Bigger Picture Slowdown - rolling

 

Rolling Claims Improve Slightly, but Do Little to Counter the Bigger Picture Slowdown - raw

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.

Rolling Claims Improve Slightly, but Do Little to Counter the Bigger Picture Slowdown - 9

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.

Rolling Claims Improve Slightly, but Do Little to Counter the Bigger Picture Slowdown - census chart

Joshua Steiner, CFA

Allison Kaptur