The Market Today

Initial and Continuing Claims Below Pre-Pandemic Levels Despite Omicron

by Craig Dismuke, Dudley Carter


Initial and Continuing Jobless Claims Now Both Below Pre-Pandemic Levels: Perfectly illustrating the unique problems that define the U.S. economy at the end of 2021, this morning’s jobless claims data showed both initial and continuing claims dropping below their pre-pandemic levels – despite there still being 3.9mm lost nonfarm payrolls (November report) and employers citing their biggest challenge as finding labor.  Initial jobless claims for the week ending December 25 fell from 206k to 198k, despite the survey window catching some of the rise in omicron cases.  This is the third lowest weekly total since 1969 (the two lower weekly reports have both come in the past two months).  Initial claims averaged 212k per week in the ten weeks leading up to the pandemic. Continuing jobless claims for the week ending December 17 fell 140k to 1.716mm, the lowest level of the pandemic.  This is the first report to fall below the pre-pandemic average of 1.73mm.  The next few weeks’ reports will be critical in determining if omicron will eventually have an impact on the labor market.

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Infections and Severe Health Outcomes Decoupling: Global case counts continued to surge with country after country reporting new record infections Wednesday as Omicron continues to spread. However, a top U.S. health adviser to President Biden said recent health data indicate a lower hospitalization-to-case ratio amid the latest wave. Additionally, the director of the CDC reported that the seven-day average for fatalities fell around 7% to roughly 1,100.


Pending Home Sales Cool after October Surge: Pending home sales fell unexpectedly in November after a sharp jump in October, extending a volatile trend for the data series during the post-pandemic era. New contracts signed for existing homes pulled back 2.2% last month following a 7.5% surge in October, pulling the index down from its highest level of 2021. Through November, the pending home sales index has averaged a 6.1% monthly swing (absolute value), the second most volatile year for pending sales behind 2020 since the data started in 2001. Through the monthly ups and down, however, pending sales have trended higher, reflecting strength in underlying demand amid tight inventories and rapid price increases. Sales cooled across all four geographic regions, led by an outsized 6.3% drop in the Midwest.


Longer Yields Rose Wednesday as Equities Reached New Records: Despite a sharp rise in longer Treasury yields, the Dow and S&P 500 managed small gains Wednesday to new records. The Dow rose 0.25% to its first new all-time high since November 8, registering its first six-day string of gains since mid-March. The S&P 500 gained 0.14%, supported by improvement for eight of its eleven underlying sectors and setting its 70th record close of 2021. The Nasdaq edged 0.1% lower on continued weakness for tech-related names. Absent the strength for equities, Wednesday’s broad jump in longer global sovereign yields lacked an obvious catalyst. Except for a small dip for the 2-year Treasury yield, the rest of the curve rose into and out of a soft auction of 7-year notes. The 5-year yield added 3.7 bps to 1.30% while the 7-year yield rose 5.7 bps to 1.46%. The $56 billion auction tailed by 2.3 bps, the most since March. The 10-year yield, however, led all yield increases, rising 6.9 bps to finish at session highs. The 1.55% yield was the highest close and first above the 50-day moving average since November 24.

U.S. equity futures were pointing to small gains earlier as European indexes gained ground following mixed results in Asia. Shortly after 7 a.m. CT, the Dow and S&P 500 had edged 0.1% higher following record closes as the Nasdaq recovered 0.2%. Global economic calendars and trading volumes remained light Thursday, trends that are expected to be replicated during the U.S. session. Prior to the release of the weekly jobless claims data, longer Treasury yields had pared a portion of Wednesday’s big gains. Just before the data were released, the 2-year and 3-year yields were essentially flat while maturities from the 5-year to 30-year had dipped 0.7 bps. The 10-year yield was 1.4 bps lower at 1.54% shortly after the better-than-expected jobless claims results.

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