Long-term Jobless Claims Rising Higher
Thursday, December 29, 2022
Pre-market futures are stronger after Thursday’s digesting of the Weekly Jobless Claims numbers. 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.
Although the new print is quite good, it’s not particularly notable. Initial Jobless Claims last week came in at 225K, slightly above expectations and +9000 claims from the previous week’s 216K. Although cycle lows were reached in the second week, these figures can be understood as a lot of seasonal static. There are also extra employees in Retail and Warehousing. Over the past year, today’s headline on new jobless claims is about at the median.
Continual ClaimsHowever, the number of continuing claims has risen by 41K from 1.67 million to 1.71 millions two weeks ago. 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. The Fed is currently ready to raise interest rates above 5%, and then keep them stable until backward-looking economic reports show 2% inflation. 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.
We look to 2023 as a guideline for the future of the economy. 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?
However, the Fed has remained more rigid in its approach to monetary policies, despite having reads that have been strong. 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. The Fed will only change its strategy if the economy fails to thrive under such severe measures.
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