Thursday, December 29, 2022
Pre-market futures have gotten stronger upon the digestion of new Weekly Jobless Claims numbers this Thursday morning. Where we were seeing a relatively modest open higher, reversing a lower trading session yesterday, we’ve gone from +100 points on the Dow, +20 on the S&P 500 and +75 points on the Nasdaq to +170, +30 and +125 points, respectively, since.
The new print is fine, but nothing particularly noteworthy: Initial Jobless Claims last week came in at 225K, slightly above expectations and +9000 claims from the previous week’s 216K. Cycle lows came the second week of December, but these figures should be understood to have plenty of seasonal static, with extra hires in Retail and Warehousing, etc. Over the past year, today’s headline on new jobless claims is about at the median.
Continuing Claims, on the other hand, have risen +41K week over week, from 1.67 million previously to 1.71 million two weeks ago (Continuing Claims are reported a week behind new claims). This is the highest level we’ve seen since February of this year; we began 2022 hovering just below 1.8 million longer-term jobless claims and nearly touched 1.3 million this past June. So we’re clearly on an upswing.
As we’ve opined plenty in this space over the past few days (Christmas Week is notoriously light on market news events), the employment story looks to be a big factor for 2023. Right now, the Fed is prepared to set interest rates above 5% and keep them steady until backward-looking economic prints demonstrate 2% inflation is back in view. But a big jump in unemployment — and its subsequent deflating effect on wage gains — might be the final straw on the camel’s back to reverse this policy.
More broadly speaking, we look to 2023 to provide us with clues for when the economy can return to prosperity. Many market participants remain hopeful this will all be taken care of in the first half of next year, whether a light recession brings inflation in line or whether something else “breaks” and must be mended, and we’ll be off to the races in the second half. The third year of a U.S. president’s first term is always the strongest trading year, right?
Yet thus far, economic reads have been stubbornly strong, helping keep the Fed more draconian in its approach to monetary policy. The whole “bad news is good news” thing is based on this principle: the stronger the economy proves itself — in goods and services pricing, labor force, etc. — the more the Fed needs to keep rates high, which constricts consumer “freedom” and dissolves the era of cheap money. So when the economy proves itself not able to prosper under such harsh measures, only then will the Fed look to change its strategy.
Questions or comments about this article and/or its author? Click here>>
Image: Bigstock
Longer-Term Jobless Claims Creeping Higher
Thursday, December 29, 2022
Pre-market futures have gotten stronger upon the digestion of new Weekly Jobless Claims numbers this Thursday morning. Where we were seeing a relatively modest open higher, reversing a lower trading session yesterday, we’ve gone from +100 points on the Dow, +20 on the S&P 500 and +75 points on the Nasdaq to +170, +30 and +125 points, respectively, since.
The new print is fine, but nothing particularly noteworthy: Initial Jobless Claims last week came in at 225K, slightly above expectations and +9000 claims from the previous week’s 216K. Cycle lows came the second week of December, but these figures should be understood to have plenty of seasonal static, with extra hires in Retail and Warehousing, etc. Over the past year, today’s headline on new jobless claims is about at the median.
Continuing Claims, on the other hand, have risen +41K week over week, from 1.67 million previously to 1.71 million two weeks ago (Continuing Claims are reported a week behind new claims). This is the highest level we’ve seen since February of this year; we began 2022 hovering just below 1.8 million longer-term jobless claims and nearly touched 1.3 million this past June. So we’re clearly on an upswing.
As we’ve opined plenty in this space over the past few days (Christmas Week is notoriously light on market news events), the employment story looks to be a big factor for 2023. Right now, the Fed is prepared to set interest rates above 5% and keep them steady until backward-looking economic prints demonstrate 2% inflation is back in view. But a big jump in unemployment — and its subsequent deflating effect on wage gains — might be the final straw on the camel’s back to reverse this policy.
More broadly speaking, we look to 2023 to provide us with clues for when the economy can return to prosperity. Many market participants remain hopeful this will all be taken care of in the first half of next year, whether a light recession brings inflation in line or whether something else “breaks” and must be mended, and we’ll be off to the races in the second half. The third year of a U.S. president’s first term is always the strongest trading year, right?
Yet thus far, economic reads have been stubbornly strong, helping keep the Fed more draconian in its approach to monetary policy. The whole “bad news is good news” thing is based on this principle: the stronger the economy proves itself — in goods and services pricing, labor force, etc. — the more the Fed needs to keep rates high, which constricts consumer “freedom” and dissolves the era of cheap money. So when the economy proves itself not able to prosper under such harsh measures, only then will the Fed look to change its strategy.
Questions or comments about this article and/or its author? Click here>>