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Posts Tagged ‘initial claims’

Jobless Claims Hit a Roadblock

February 25th, 2010 Michael McDonough Comments off

What had been an improving trend in initial jobless claims has hit a roadblock with claims rising this morning to by 22K to 496K .  Recent volatility can be attributed to everything from weather to a backlog of claims in California, but in the end still points to further deterioration for the monthly employment report.  Typically, initial claims would need to fall to a level below the 400K to in order to support gains in non-farm payrolls.  Prior to December most believed this would be a reality in the near-future, but with claims now struggling to move below 450K the market will have to wait.

Unfortunately, the same bad weather that impacted claims in February will likely have a similar impact on the month’s payroll data.  In January payrolls declined by -20K, and I expect this decline will be even greater in February.  I expect the market will need to wait yet another month before receiving data supporting a nascent recovery for the labor sector.

Initial Claims vs. Unemployment Rate

Source: Bloomberg

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Claims Unchanged

November 19th, 2009 Michael McDonough Comments off

Initial jobless claims came in unchanged this morning at -505K, while its overall downward trend continues to indicate that fewer people are losing their jobs.  This should help decelerate the climb in the unemployment rate and decline in payrolls, until they eventually peak some time during the first half of 2010.  It is very likely initial claims will drop below the psychological barrier of -500K over the next couple of weeks.  Presently, I anticipate that we will see a smaller decline in payrolls for November than we did in October. In fact there is a possibility the decline in payrolls for November could be fewer than 100K, which has not happened since Jan. 2008.

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Existing Home Sales Show Unexpected Decline

September 24th, 2009 Michael McDonough 1 comment

Existing home sales for August fell by 2.7% to a 5.10mn annualized selling rate, compared to a Bloomberg consensus forecast of 5.35mn and a rate of 5.24mn in July.This is the first time in four months the index has experienced a decline. Single-family sales declined 2.8% in August to a rate of 4.48mn versus 4.61 million in July, while multi-family sales diminished 1.6% in August to 620,000 versus 630,000 in July.  Median existing home prices fell to US$177,700 in August from US$181,500 a month prior.  Despite weakness in the sales data the inventory of existing homes fell to 8.5 months from 9.3 months in July.

Presently it is hard to say what could have caused this unexpected decline, it could be an anomaly in an otherwise improving trend.  Alternatively, as the Cash for Clunker’s program neared its end most consumers looking to take advantage of it had already done so.  With this in mind, the US first time home buyer tax credit is set to expire in November; it may be possible a portion of buyers looking to take advantage of this program may have already purchased their homes.  However, given that this is August data, and still relatively far off from November, I would be surprised if this had much of an effect.  Nevertheless, it is something that should continue to be monitored in the months ahead.  Increasing unemployment is also still providing some pretty strong headwinds toward the sector.  New home sales will be released tomorrow.

In other news, initial jobless claims came in better than anticipated this morning declining by21K to 530K.

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Initial Claims Show Modest Decline

September 3rd, 2009 Michael McDonough Comments off

Initial claims this week fell by 4K this week declining to 570, this was above the Bloomberg consensus forecast of 562K.  But, the 4wk moving average reached its highest level in  7wks at 571.25K.  Last week’s number was revised to 570K from 574K.  Continuing claims rose 92K reaching 6.23mn.  Initial claims should marginally improve over the coming months as weakness in the labor market slowly abates. But, make no mistake about it these levels are still uncomfortably high, and will continue to adversely impact the US payroll data for some time.  In fact using a simple regression analysis claims at their current levels would indicate a decline in payrolls of nearly 500K, however, recently this model has been exaggerating the actual effect on payrolls, but nevertheless is a cause for concern going forward.  US equity futures gave back some early gains on the report.

Next on the docket will be the Non-Manufacturing ISM release at 10:00AM.  Also, early chain store sales results seem to indicate a weaker than anticipated back to school season has led to bigger declines than projected for some retailers in August.

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STATES WITH A DECREASE OF MORE THAN 1,000


State Change State Supplied Comment
MI -2,968 Fewer layoffs in the automobile industry.
FL -1,653 Fewer layoffs in the construction, trade, service, and manufacturing industries, and agriculture.
PA -1,288 Fewer layoffs in the transportation equipment, primary metals, furniture, transportation, food, and service industries.
NJ -1,271 Fewer layoffs in the construction, trade, service, and manufacturing industries.
AL -1,266 Fewer layoffs in the public administration and primary metals industries.
IA -1,147 No comment.
WA -1,133 No comment.

STATES WITH AN INCREASE OF MORE THAN 1,000


State Change State Supplied Comment
NH +1,237 No comment.
OH +2,018 Layoffs in the automobile industry.
CA +8,632 Layoffs in the construction, trade, and service industries.

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Initial Jobless Claims Rise More Than Anticipated

August 20th, 2009 Michael McDonough Comments off

Initial jobless claims rose this morning by 15K to 576K compared to last week’s number revised number of 561K, and a consensus forecast of 550K.  This is the second consecutive week claims have unexpectedly risen.  The 4wk moving average moved up by 4,250 to 570K.  Despite the rise over the past two weeks, claims should begin to moderate over the months ahead, however, there are now slightly more downside risks to this forecast.  The current level of initial claims current level is uncomfortably high, and will continue to adversely impact the US payroll data for some time.  In fact using a simple regression analysis claims at their current levels would indicate a decline in payrolls of roughly 500K, however, recently this model has been exaggerating the actual effect on payrolls, but nevertheless is a cause for concern going forward.

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Jobless Claims Unexpectedly Rise, Retail Sales Decline, & Foreclosures Are Up…

August 13th, 2009 Michael McDonough Comments off

Initial jobless claims rose to 4K this week to 558K, compared to a previous revised reading of 554K and a Bloomberg consensus forecast of 543K.  This number has been trending to lower, which indicates a slowing improvement for the US labor market.  But, claims still remains far from healthy levels, and still indicates significant deterioration for the US payroll data.  I do not see this week’s increment as the beginning of a trend, but rather a one-off event on the bumpy road to recovery, however, it will be important to monitor next week’s result to confirm this.

Retail sales unexpectedly fell -0.1%, despite the success of the government’s ‘cash for clunkers program’.  The Bloomberg consensus was for an increase of +0.8%.  Retail Sales (Ex-autos) fell an even further -0.6% for the month. This weakness is likely derived from the fact that consumers are still scared to spend in light of sustained weakness in the labor market, despite the government’s stimulus package.  Based on this, it is unlikely we will see much, if any, improvement to retail sales over the coming months.  Furthermore, rising interest rates and energy prices will not help the situation.

M/M Y/Y
Retail & food services, total -0.1% -8.3%
Total (ex-autos) -0.6% -8.5%
Retail Sales -0.1% -9.4%
Motor vehicle & parts dealers 2.4% -7.3%
Auto & other motor veh. Dealers 2.8% -8.0%
Furniture & home furnishings stores -0.9% -12.9%
Electronics & appliance stores -1.4% -14.6%
Building mat. & garden eq. & supplies dlrs. -2.1% -14.7%
Food & beverage stores -0.3% -0.8%
Grocery stores -0.3% -1.1%
Health & personal care stores 0.7% 4.1%
Gasoline stations -2.1% -32.5%
Clothing & clothing accessories stores 0.6% -7.6%
Sporting goods, hobby, book & music stores -1.9% -6.4%
General merchandise stores -0.8% -4.7%
Department stores (ex. L.D.) -1.6% -11.5%
Nonstore retailers 0.1% -5.2%
Food services & drinking places 0.4% 1.0%

Finally, foreclosures rose 7% in July versus June, realizing a32% year over year gain.  Foreclosures combined with weakness in the labor market will continue adversely impacting housing sector, preventing it from reaching its full potential despite recent improvements.  Regarding the issue the CEO of RealtyTrac, James Saccacio said,  “Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we’re seeing significant growth in both the initial notices of default and in the bank repossessions.”

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Jobless Claims Drop More Than Expected

August 6th, 2009 Michael McDonough Comments off

Initial jobless claims for the week ending Aug 1, fell 38K to 550K, compared to a street consensus of 575K.  The week prior’s number was revised up to 588K from 584K.  This points to continued improvement in the labor market from what. however,  is a rather dismal base.  Claims at these levels still point toward a decreases in future payroll data, albeit, at a slower pace.  In any case the sector shows signs of improving, but likely won’t reach healthy levels until next year.  Continuing claims, which has one extra week’s lag, rose to 6.310mn from 6.241mn.  The market had a mixed reaction to this news as they wait for today’s retail sales report, and Friday’s payroll data.

In unrelated news, Friday’s critical payroll release could face some negative pressure on the back of a worse than anticipated ADP report and weakness in the ISM non-manufacturing employment index.

Initial Claims

Claims

States with a decline of more than 1K in Claims  (DOL)


State Change State Supplied Comment
NC -9,809 Fewer layoffs in the rubber/plastics, textile, furniture, industrial machinery, and trade industries.
MI -9,085 Fewer layoffs in the automobile industry.
FL -8,714 Fewer layoffs in the construction, trade, service, and manufacturing industries, and agriculture.
GA -6,948 Fewer layoffs in the construction, trade, service, and manufacturing industries.
AL -3,822 Fewer layoffs in the transportation equipment, primary metals, apparel, and manufacturing industries.
NY -3,577 Fewer layoffs in the transportation, service, and manufacturing industries.
PA -3,518 Fewer layoffs in the primary metals, fabricated metals, and service industries.
IN -3,478 Fewer layoffs in the automobile and manufacturing industries.
VA -2,975 Fewer layoffs in the automobile industry.
IL -2,835 Fewer layoffs in the trade, service, and manufacturing industries.
KY -1,697 Fewer layoffs in the automobile, trade, and manufacturing industries.
MO -1,648 Fewer layoffs in the manufacturing industry.
NJ -1,548 Fewer layoffs in the transportation, warehousing, service, and manufacturing industries.
WI -1,511 Fewer layoffs in the construction, trade, and manufacturing industries.
CT -1,459 No comment.
KS -1,187 No comment.
WA -1,165 No comment.
CA -1,138 No comment.
IA -1,112 No comment.
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US Week Ahead: Jobs & Manufacturing

August 1st, 2009 Michael McDonough Comments off

Following last week’s mixed data, the market will be searching for indications of the strength and timing of a US economic recovery — and there will be plenty of places to look.  In contrast to the relative quiet of the past several weeks, a slew of economic indicators pertaining to jobs and manufacturing should be stealing the spotlight away from earnings.  The coming week’s biggest highlights are likely to be Monday’s ISM manufacturing report and Friday’s ever important employment situation release.  Companies reporting earnings this week include Cisco, Proctor and Gamble, Kraft, MGM, News Corp, CBS, and Prudential.  After last week’s record US Treasury auctions, on Monday the Treasury Department will be releasing a quarterly update on its upcoming borrowing requirements; given the level of the US deficit and continued efforts to bolster the economy, the amount of future debt will probably be quite significant and could cause some reaction in the market.

I want to take a moment to remind everybody that while the number in the headline often garners the most attention, it’s the details that tell the true story.  There were a couple instances last week where a data release immediately shifted sentiment in one direction, but as the details behind the report were digested, said sentiment quickly took an about face.  This was especially true for what on the surface appeared to be a very negative durable goods release.  So let’s take this as a lesson, and be sure to pay close attention to the details behind this week’s data.

Monday August 3rd:

Motor Vehicle Sales (Risk: Positive, Market Reaction: Moderate): This release could face some upward pressure due to the effects of the US Government’s new “Cash for Clunkers Program”, which thus far appears to be a success.

10:00AM: ISM Manufacturing Index (Risk: Negative, Market Reaction: Significant): Despite an easing recession, the ISM could face some weakness on last month’s weak new orders index.  But, low inventory levels could help to offset a portion of this effect.  The current Bloomberg consensus for the ISM is 46.5, versus last month’s release of 44.8.  It will also be important to keep an eye on the details of the report, especially the employment, new orders, inventories, and prices paid indices.

10:00AM: Construction Spending (Risk: Negative, Market Reaction: Moderate): Gains in residential construction will likely be offset by declines in commercial construction on the back of lower corporate profits.  The current Bloomberg consensus for construction spending is a monthly change of -0.5%, compared to a previous reading of -0.9%.

Tuesday August 4th:

7:45AM: ICSC-Goldman Store Sales (Risk: Downward, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales.  Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure.  Last week’s number indicated a 1.0% gain in store sales over the previous week.

8:30AM: Personal Income and Outlays (Risk: Neutral, Market Reaction: Moderate): Given the timing of this release—right after the 2Q09 advanced GDP release—the report loses some of its significance.  Nevertheless, the report will likely show a moderate increase in the personal consumption expenditure for June, stemming from higher energy prices.  Personal income will likely exhibit significant declines on the back of Weakness in the labor market and a decline in government payments.  The current Bloomberg consensus forecast for the change in June’s personal income is -1.1%, compared to the previous month’s reading of 1.4%.  The forecast for the monthly change in June’s personal consumption expenditure is 0.3%, or unchanged from the previous month.

10:00AM: Pending Home Sales Index (Risk: Positive, Market Reaction: Moderate): A strong number in this index would continue to support the current rebound in the U.S. housing market, which could have a moderate impact on trading. Despite the fact that not all pending home sales turn into actual sales, this index is considered a good forward looking indicator toward housing activity.

Wednesday August 5th:

Chain Store Sales (Risk: Negative, Market Reaction: Moderate): Chain store sales probably came under pressure again last month, as consumers reduced spending on the back of weakness in the labor market.  In fact, a recent survey by the National Retail Federation found that families this year will be spending on average US$549 versus US$594 last year on back to school goods.  This along with other negative factors should adversely impact this summer’s retail sales.

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index.  Last week the the overall index fell 6.3%; while the refinance index decreased by 10.9% on rising, but still relatively low mortgage rates.

8:15AM: ADP Employment Report (Risk: Neutral, Market Reaction: Moderate/Significant): The ADP employment report is typically considered a good indicator of the payroll data released later in the week, so a big swing in these data could shift expectations for the employment data released on Thursday and thus significantly affect trading.

10:00AM: Factory Orders (Risk: Neutral, Market Reaction: Significant): June’s decline in durable goods orders could place some downward pressure on this index, however, an increase in June’s nondurable component, stemming from increased petroleum orders could offset a portion of that decline.  The current Bloomberg consensus for June’s factory orders is -0.9% m/m, compared to a previous reading of 1.2%

10:00AM: ISM Non-Manufacturing Index (Risk: Upward, Market Reaction: Significant): July’s non-manufacturing ISM will likely remain relatively unchanged.  But, it will be important to focus on the prices paid index, which took a big jump last month, and the new orders index, which tends to be a forward-looking indicator for the primary business activity index.  The current Bloomberg consensus forecast for July’s non-manufacturing ISM is 48.2, compared to June’s reading an 47.0, and still below the breakeven point of 50.

10:30AM: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report indicates domestic petroleum inventories, which could have a significant impact on the energy sector.  Last week this report showed an unexpected increase in crude oil inventories, which led to a drop in oil prices.  (Please see this brief discussion piece on FiatEconomics.com describing the potential effect of inventories on oil prices.)

Thursday August 6th:

8:30AM: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial Claims rose 25K to 584K, last week as the index continues to adjust for erroneous seasonal adjustment factors stemming from early auto plant closures.  The good news these effects by now likely been washed out, so we should once again be able to rely on claims as a being an accurate indicator of current conditions .  On that note, last week’s claim number was still far below the 4wk moving average–from before the incorrect seasonal adjustments– which in my view shows there has been some improvement in the initial claims data.  But, given the still elevated numbers it will continue to have an adverse effect on payroll data.  The current Bloomberg consensus for this week’s initial claims number is 575K.

10:00AM: EIA Natural Gas Report (Risk: Neutral, Market Reaction: Moderate): This report highlights domestic natural gas inventories, which could have a significant impact on the energy sector.

4:30PM: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness.  The market will pay close attention to the reserve bank credit component, which measures factors supplying   providing reserves into the banking system.  Last week the Fed’s balance sheet moved back below US$2trn to US$1.985trn.  The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help bring down interest rates.

Friday August 7th:

8:30AM: Employment Situation (Risk: Neutral, Market Reaction: Very Significant): What translates into improvements for jobless claims data, should help reduce some of the downward pressure facing US payroll data.  Nevertheless, we will likely still see a considerable decline in US payrolls with the current Bloomberg consensus forecast indicating a decline of 300,000, compared to last month’s fall of 467,000 jobs.  The unemployment should also continue to rise with the current consensus forecast indicating a rate of 9.7%, compared to last month’s 9.5%.  It is high likely that we could see the unemployment rate edge above 10% before the end of the year.  The market will be paying very close attention to this release, so any major surprises could hold significant consequences in trading.

3:00PM: Consumer Credit (Risk: Neutral, Market Reaction: Moderate): Consumer credit probably continued to decline in June, as consumer’s paid off credit cards and reduced borrowing.  The current Bloomberg consensus is a monthly decline of US$4.2bn

Enjoy the weekend!

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Claims Continue to Rise, Due to Erroneous Adjustment Factors

July 30th, 2009 Michael McDonough Comments off

Initial Claims rose 25K to 584K, as the index continues to adjust for erroneous seasonal adjustment factors stemming from early auto plant closures.  The good news these askew effects have by now likely all been washed out, so we should once again be able to rely on claims as a reliable indicator.  On that note, this week’s claim number is still far below the 4wk moving average–from before the incorrect seasonal adjustments–, which in my view shows there has been some improvement in the initial claims data.  But, given the still elevated numbers it will continue to have an adverse effect on payroll data.  Finally, continuing claims declined for the third consecutive week reaching 6.197mn.

As an aside, I recently found a chart in US Today, which highlighted the anticipated GM plant closures along with the total number of employees effected (see below).  To that I added each states unemployment rate.  It was no surprise to find that most of the plants effected are located in states, which have unemployment rates well above the national average.  These economies will likely remain depressed for sometime and will continue to be impacted by the downturn in the auto sector.

(Source USA Today & BLS)
City Plant status Population GM workforce Unemploy. Rate
Pontiac, MI Closing by October (assembly) 66,095 1,470 15.2%
Spring Hill, TN On standby (assembly) 26,230 2,671 10.8%
Wilmington, DE Closing by end of July (assembly) 72,592 1,060 8.4%
Grand Rapids, MI Closed (stamping) 193,396 912 15.2%
Indianapolis , IN Closing by Dec. 2011 (stamping) 808,466 762 10.7%
Ontario, OH Closing by June 2010 (stamping) 5,200 860 11.1%
Livonia, MI Closing by June 2010 (engine) 91,220 118 15.2%
Flint, MI Closing by Dec. 2010 (components) 112,900 646 15.2%
Ypsilanti, MI Closing by Dec. 2010 (powertrain) 21,464 1,364 15.2%
Parma, OH Closing by Dec. 2010 (components) 77,947 1,026 11.1%
Fredericksburg, VA Closing by Dec. 2010 (components) 22,818 81 7.2%
Massena, NY Closed in May (castings) 10,539 35 8.7%
National 1,508,867 11,005 9.5%
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Initial Claims Climb 30K to 554K

July 23rd, 2009 Michael McDonough Comments off
As I anticipated, and explained in my US Week Ahead, initial claims experienced a significant uptick this morning, which will likely be continued next week. In reality, this increment was probably due to a correction in what has been overly optimistic data stemming from erroneous seasonal adjustment factors.

Fed Chairman Bernanke in his recent testimony to Congress discussed the fact that weakness in the jobs sector and housing market will continue to be an Achilles heel for a US economic recovery. But, I anticipate that, excluding the anomalous data over the past three weeks, claims will slowly begin to improve. However, given such a weak base and initial claims forward looking ability to predict payrolls, it is very probable the overall employment situation will still get worse before it gets better. The unemployment rate likely to move above 10%. Typically, an initial claims level of around or below 350K would lead to increases in payrolls, but we are still far from those levels.

US Initial Claims

Source: St Louis FRED
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