MACRO MONDAY 9
Initial Jobless Claims
Historical Analysis and Important upcoming levels
Initial claims are new jobless claims filed by U.S. workers seeking unemployment compensation, included in the unemployment insurance weekly claims report. "Initial claims" refers to the government report on the number of workers applying for unemployment benefits for the first time following job loss
First-time jobless claims can be a useful leading indicator because elevated numbers tend to lead to further economic weakness, and to decline ahead of a recovery
Initial claims show the recent layoffs trend and does not a full picture of the labor market however it can provide more frequent data points indicating the trend in layoffs based on the recent decisions of U.S. employers. The layoffs trend can be particularly telling at economic turning points. With that in mind lets look at the chart and its historic patterns.
The Chart
The chart looks complicated but is incredibly simple and can be summarised as follows.
- Recessions are in red
- Increases to Initial Jobless Claims prior to recessions are in blue
- It is clear that prior to recessions Jobless Claims typically increase but for how long and by
what amount?
- The min/max increase in claims prior to recession is between 35k - 127k
- The min/max timeframe of increasing claims prior to recession is 7 - 23 months
- The average of the above is a 71k claims increase over a 14 month period.
- At present we are below that average at 49k increase over 11 months @ 230,000 claims.
- I have set out levels on the chart for us to monitor going forward in line with the min and
max claims amounts and timelines as above. We can monitor these levels on trading view
going forward just by pressing play and seeing if we are nearing or hitting the indicative
levels.
- Once we reach the average increase amount at 252k or the average timeline of 14 months
in Nov 2023, we are entering into higher risk recession territory.
Currently, the max increase in claims prior to recession is projected to be at the level of 308,000 (based on historic claims) and the max timeframe is out to Aug 2024 (based on historic timeframes) thus indicating that between Nov 2023 and Aug 2024, subject to continued increasing initial claims (above the average level of 252,000) it is probable that there will be a recession within this time window (Not guaranteed). If initial claims fall below their recent low of 200,000 I believe this might invalidate the possibility of a recession or at least have a significant lagging effect on time horizon. At present this outcome seems unlikely but anything is possible and we can monitor this on an ongoing basis.
The current yield curve inversion on the 2/10 year Treasury Spread provided advance warning of recession/capitulation prior to all of the above recessions however it provided us a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level (See Macro Monday 2). September will be the 6th month of that 6 – 22 month window and thus we are closing in on dangerous territory very fast.
From reviewing initial jobless claims we can see how from Nov 2023 we are stepping into a higher risk zone on this chart also (subject to continued higher increases in claims). Should we have claims higher than the average of 252,000 we will be confirming another step towards a higher risk of a recession.
Factoring in yield curve inversion and the initial jobless claims we could consider the months of Sept-Oct 2023 as Risk level 1 (yield curve inversion time window opens) and Nov-Dec 2023 as stepping into a higher Risk Level 2 (Jobless claims average timeframe hit). Should the yield curve continue to move up towards being un-inverted and should Jobless Claims increase then Jan 2024 forward could be considered a higher Risk level 3.
Adding to the above concerns is that M2 Money supply is still reducing (Macro Monday 8) and Global Net Liquidity is continuing to reduce (Macro Monday 4) as the S&P 500 is hitting a major resistance zone when accounting for M2 money supply (Macro Monday 8). At present it is clear that liquidity is reducing both globally and in the US. Currently fiscal stimulus appears to be filling the gaps and may be causing additional lagging effects to the changes we have seen imposed by Federal Reserve (balance sheet reduction and increased interest rates). Keep in mind that the Fed is also targeting higher unemployment to help quell the effects of inflation thus adding to the relevance of the Initial Jobless Claims numbers.
Continued jobless claims are another metric that is not covered here today. Continued Jobless Claims accounts for the continuation of claims over a time period, thus indicating that those workers who made the first “Initial claims” have remained unemployed thereafter and have not managed to get new work. We might cover this in a future Macro Monday. Let me know if you want it sooner than later?
We need all the help we can find in managing risk going forward and I hope all these charts can help you with that.
We can monitor all these charts on my trading view just by pressing play and seeing where things are going. Regardless ill be providing updates along the way.
Be safe out there
PUKA
Initial Jobless Claims
Historical Analysis and Important upcoming levels
Initial claims are new jobless claims filed by U.S. workers seeking unemployment compensation, included in the unemployment insurance weekly claims report. "Initial claims" refers to the government report on the number of workers applying for unemployment benefits for the first time following job loss
First-time jobless claims can be a useful leading indicator because elevated numbers tend to lead to further economic weakness, and to decline ahead of a recovery
Initial claims show the recent layoffs trend and does not a full picture of the labor market however it can provide more frequent data points indicating the trend in layoffs based on the recent decisions of U.S. employers. The layoffs trend can be particularly telling at economic turning points. With that in mind lets look at the chart and its historic patterns.
The Chart
The chart looks complicated but is incredibly simple and can be summarised as follows.
- Recessions are in red
- Increases to Initial Jobless Claims prior to recessions are in blue
- It is clear that prior to recessions Jobless Claims typically increase but for how long and by
what amount?
- The min/max increase in claims prior to recession is between 35k - 127k
- The min/max timeframe of increasing claims prior to recession is 7 - 23 months
- The average of the above is a 71k claims increase over a 14 month period.
- At present we are below that average at 49k increase over 11 months @ 230,000 claims.
- I have set out levels on the chart for us to monitor going forward in line with the min and
max claims amounts and timelines as above. We can monitor these levels on trading view
going forward just by pressing play and seeing if we are nearing or hitting the indicative
levels.
- Once we reach the average increase amount at 252k or the average timeline of 14 months
in Nov 2023, we are entering into higher risk recession territory.
Currently, the max increase in claims prior to recession is projected to be at the level of 308,000 (based on historic claims) and the max timeframe is out to Aug 2024 (based on historic timeframes) thus indicating that between Nov 2023 and Aug 2024, subject to continued increasing initial claims (above the average level of 252,000) it is probable that there will be a recession within this time window (Not guaranteed). If initial claims fall below their recent low of 200,000 I believe this might invalidate the possibility of a recession or at least have a significant lagging effect on time horizon. At present this outcome seems unlikely but anything is possible and we can monitor this on an ongoing basis.
The current yield curve inversion on the 2/10 year Treasury Spread provided advance warning of recession/capitulation prior to all of the above recessions however it provided us a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level (See Macro Monday 2). September will be the 6th month of that 6 – 22 month window and thus we are closing in on dangerous territory very fast.
From reviewing initial jobless claims we can see how from Nov 2023 we are stepping into a higher risk zone on this chart also (subject to continued higher increases in claims). Should we have claims higher than the average of 252,000 we will be confirming another step towards a higher risk of a recession.
Factoring in yield curve inversion and the initial jobless claims we could consider the months of Sept-Oct 2023 as Risk level 1 (yield curve inversion time window opens) and Nov-Dec 2023 as stepping into a higher Risk Level 2 (Jobless claims average timeframe hit). Should the yield curve continue to move up towards being un-inverted and should Jobless Claims increase then Jan 2024 forward could be considered a higher Risk level 3.
Adding to the above concerns is that M2 Money supply is still reducing (Macro Monday 8) and Global Net Liquidity is continuing to reduce (Macro Monday 4) as the S&P 500 is hitting a major resistance zone when accounting for M2 money supply (Macro Monday 8). At present it is clear that liquidity is reducing both globally and in the US. Currently fiscal stimulus appears to be filling the gaps and may be causing additional lagging effects to the changes we have seen imposed by Federal Reserve (balance sheet reduction and increased interest rates). Keep in mind that the Fed is also targeting higher unemployment to help quell the effects of inflation thus adding to the relevance of the Initial Jobless Claims numbers.
Continued jobless claims are another metric that is not covered here today. Continued Jobless Claims accounts for the continuation of claims over a time period, thus indicating that those workers who made the first “Initial claims” have remained unemployed thereafter and have not managed to get new work. We might cover this in a future Macro Monday. Let me know if you want it sooner than later?
We need all the help we can find in managing risk going forward and I hope all these charts can help you with that.
We can monitor all these charts on my trading view just by pressing play and seeing where things are going. Regardless ill be providing updates along the way.
Be safe out there
PUKA
Comment:
Don't forget to check out this weeks MACRO MONDAY 10 - Interest Rate Hikes and how they effect the S&P500
It illustrates how the Federal Reserves Interest Rate Hikes, pauses and reduction can help guide us going forward. We look at the time patterns of the past that can give us a good indication as to when or if there is a significant decline in the market, and its not what you think.
It illustrates how the Federal Reserves Interest Rate Hikes, pauses and reduction can help guide us going forward. We look at the time patterns of the past that can give us a good indication as to when or if there is a significant decline in the market, and its not what you think.
Comment:
PRESS PLAY ON THE CHART TO SEE WHAT LEVEL WE ARE AT NOW
US Initial Jobless claims ✅
Rep: 202k
Exp: 210k
Prev: 203k
(Lower than expected & intermediate trend is down)
Summary:
Initial jobless claims came in lower than expected today and the intermediate trend remains to the downside. Far more positive than continuous claims.
▫️ From Sept 2022 – March 2023 there was a sharp rise from 182k to c.245k in Initial Jobless Claim
▫️ Since March 2023 we have reduced from c.245k down to 202k in Dec 2023.
▫️ This intermediate down trend is positive however we made recent lows in Jan 2023 of 199k and I would like us to break these lows to completely remove any alarm here. These lows at 199k level also coincide with the June 2019 lows (dashed line on chart).
▫️ With Continuous Claims in quiet worrying territory I think we need to remain cautionary despite these relatively positive figures on Initial Claims.
US Initial Jobless claims ✅
Rep: 202k
Exp: 210k
Prev: 203k
(Lower than expected & intermediate trend is down)
Summary:
Initial jobless claims came in lower than expected today and the intermediate trend remains to the downside. Far more positive than continuous claims.
▫️ From Sept 2022 – March 2023 there was a sharp rise from 182k to c.245k in Initial Jobless Claim
▫️ Since March 2023 we have reduced from c.245k down to 202k in Dec 2023.
▫️ This intermediate down trend is positive however we made recent lows in Jan 2023 of 199k and I would like us to break these lows to completely remove any alarm here. These lows at 199k level also coincide with the June 2019 lows (dashed line on chart).
▫️ With Continuous Claims in quiet worrying territory I think we need to remain cautionary despite these relatively positive figures on Initial Claims.
Whilst initial jobless claims (or first time claimers) did not increase the number of people already collecting jobless benefits rose by 28,000 to 1.73 million in the week ending Aug. 19. That’s the highest level since early July. These continuing claims are at 1.725M vs. 1.706M est.
On an unadjusted basis, claims fell 6,970 to 192,467 in the week ended Aug. 26.
The job market continues to show resilience however the increase in continuous claims could be a signal of a tide slowly turning.