The US equity markets are very bullish as today’s early-morning U.S. reports revealed declines in initial and continuing claims that slightly outperformed assumptions, with a -33k initial claims drop to a still-elevated 779k in the last week of January, and a -193k continuing claims decline to a slightly tighter than expected 4,592k.
The insured jobless rate fell to a new cycle-low of 3.2% from 3.4%. We left our January nonfarm payroll estimate at 100k. We also saw a Q4 productivity contraction rate of -4.8%, after an expected Q3 boost to 5.1% from 4.6%, leaving a weaker Q4 reading that reflected a surprisingly large 10.7% hours-worked rise alongside the expected 5.3% output increase. A 1.7% compensation increase translated to a hefty 6.8% Q4 unit labor cost gain.
Key Market Data Points:
- Initial Claims fell -33k to 779k from 812k (was 847k).
- Initial claims on an NSA basis fell -24k to 816k, after a -97k plunge to 840k (was 874k).
- Continuing claims fell -193k to 4,592k from 4,785k (was 4,771k).
- The insured jobless rate fell to a new cycle-low of 3.2% from 3.4%.
- Productivity grew at a -4.8% pace in Q4, after a 5.1% (was 4.6%) Q3 pace.
- The BLS output index grew at a 5.3% Q4 pace, after a 44.1% (43.4%) Q3 gain.
- Compensation per hour grew at a 1.7% Q4 pace, after a -2.2% (was -2.3%) Q3 pace.
- Unit labor costs grew at 6.8% Q4 pace, after a -7.0% (was -6.6%) Q3 pace.
Initial and Continuing Claims
The -33k initial claims drop to a still-elevated 779k in the last week of January followed big revisions that left a -63k drop to 812k (was 847k) in the week of the MLK holiday from 875k (was 914k) in the BLS survey week. We have three consecutive drops to a level that almost exactly matched our assumption. Claims on an NSA basis fell -24k to 816k, after a -97k plunge to 840k (was 874k) in the prior week. Continuing claims fell -193k to a slightly tighter than expected 4,592k, after a -190k drop to 4,785k (was 4,771k). The mix of data were slighter tighter than expected.
We attribute the big holiday season gyrations to both the usual seasonal claims rise to a peak in early January before falling, combined with the difficulties of seasonal adjustment in this odd holiday season, and a surge in applications after the passage of the stimulus package. We will leave our January nonfarm payroll estimate at 100k.
Initial claims are averaging 844k in January, after averages of 828k in December, 749k in November, and 786k in October.
The 875k January BLS survey week figure followed prior survey week readings of 892k in December, 748k in November, and 797k in October.
Continuing claims fell -537k between the December and January BLS survey weeks, following prior drops of -767k in December, -1,734k in November, -4,924k in October, -1,745k in September, -2,459k in August, -2,280k in July, and -1,610k in June.
Our 100k January nonfarm payroll estimate follows a -140k drop in December, but prior gains of 336k in November and 654k in October. Our forecast tracks the moderating continuing claims downtrend. We have firm MBA purchase index readings with the housing boom, a solid 174k ADP rise, and a strong path for producer sentiment. Vehicle sales bounced 2% in January, though assemblies have been restrained in recent months.