initial claims with the s&p 2012 to current

As a backdrop for today’s big employment report, the Labor Department released its initial and continuing claims figures. Initial claims came in up 28K at 385K, an increase of almost 8%.  Initial claims are now up around 15% since bottom out on March 9th.  On the continuing claims side, the figures are marginally better, with today’s figures putting the continuing claims figure at 3.063 million, a decrease of about a quarter of a percent over the prior week.

The market appears to be discounting the initial claims figures, focusing instead on today’s employment report, where the consensus among polled economists stands at an increase of 193K in non-farm employment.  An employment growth figure of 193K would represent moderately low month over month growth.

Where do today’s initial claims figures place us on the S&P 500 (INDEXSP:.INX) – Initial Claims continuum?

initial claims with the s&p weekly 2000 2013 to current

The relationship is presented in the above scatterplot of the S&P 500 (vertical axis) and the weekly initial claims figures (horizontal axis).  The most desirable place to be is in the top left column, where claims are lower than average and theS&P 500 (INDEXSP:.INX) is performing well.  The least desirable place to be is the bottom right quadrant, where the S&P is depressed (below average) and initial claims are coming in higher than average (recession).  Today’s initial claims figures put us right on the border between an accelerating economy and a slowdown, which is represented by the blue dot on the above graph.

With this background in mind, what should you expect from tomorrow’s employment report?  In keeping with the consensus view, you should expect moderately low employment growth, although keep in mind that initial claims are generally a leading indicator of where employment is going, in contrast to tomorrow’s employment report, which will likely be more of an indicator of how things currently stand.  The employment report for next month will likely give an indication as to whether the recent three week climb in initial claims is more than just statistical noise.

In sum, initial unemployment claims came in at 385K, an increase of 28K over the upwardly revised 357K of the prior week.  The 28K increase comes on top of increases for the prior two weeks of 7K and 16K, bringing the total increase over the prior three weeks to 51K.  Whether market participants should be considering the prior three weeks as simply statistical noise is the question of the day.