Is the Jobless Claims Surge on Sandy or Something More?

It happened! Jobless claims surged to over the psychological threshold of 400K. Some time back, we warned that one dreaded Thursday morning we would wake up to a stock market demise catalyzed by jobless claims over 400K. We even said that you might consider reducing risk on Wednesday afternoons as a hedge. Well, this report is not going to be the one to catalyze a slide, so you can contain your concern, though you still have plenty to worry about regarding the fiscal cliff right now. The reason this latest report shouldn’t overly concern investors is the media’s ready acceptance of a Hurricane Sandy impact, which very likely did affect filings in several ways. Since it will be difficult to pinpoint the impact, stocks should overlook the psychological break, at least for now. However, take note that the movement in the employment services companies this morning seems to indicate some market suspicion about the true driver of today’s reported surge in jobless claims.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Jobless Claims

Weekly Initial Jobless Claims surged by 78,000 to 439,000 in the week ending November 10, 2012, which was significantly more than the economists’ consensus for 376K. Still, Hurricane Sandy has added some significant noise to the data, as should be the case for economic reports across the board over the next month or two. A more reliable trend metric, the four-week moving average for weekly claims, increased by 11,750 in the reported period, to 383,750.

Insured unemployment edged up by a tenth of a percentage point to a 2.6% rate in the lagged November 3 ending period. The number of insured unemployed Americans increased by 171,000 in that same period, rising to 3.33 million. The number of Americans claiming benefits of some sort through all programs decreased by 100,423 in the period ending October 27, falling to 4.98 million. As we have noted in the past, there are of course two drivers of this trending decline. First, some Americans are finding work. However, many Americans are simply exhausting their allotted benefits and falling off the workforce radar.

Weekly jobless claims may very well rise legitimately above the 400K psychological threshold in 2013 for a variety of reasons. Still, the nation’s largest employers, including Wal-Mart (NYSE: WMT), Target (NYSE: TGT), McDonald’s (NYSE: MCD), Sears (Nasdaq: SHLD) and Kroger’s (NYSE: KR) are not likely to shed jobs anytime soon due to the necessities they provide at value. However, small businesses, which employ more Americans than any other sector of the economy, are likely losing confidence due to the fiscal cliff, and could very well cut workforce if their taxes rise.

For informational purposes, I always like to relay the state relative data for interested readers. The highest insured unemployment rates in the week ending October 27 were in Alaska (4.5), Puerto Rico (3.9), California (3.0), Oregon (3.0), Pennsylvania (3.0), Virgin Islands (2.9), Arkansas (2.7), Nevada (2.7), New Jersey (2.7), Illinois (2.6), New York (2.6), and North Carolina (2.6).

The largest increases in initial claims for the week ending November 3 were in Pennsylvania (+7,766), Ohio (+6,450), New Jersey (+5,675), Michigan (+2,373), and Connecticut (+1,783), while the largest decreases were in California (-8,149), New York (-2,241), Florida (-939), Georgia (-913), and Indiana (-603).

In closing, the shares of employment servicers are sensitive to this weekly report, and so the impact of the week’s change can best be read through their movement. The action in industry shares follows.

Company & Ticker	Thursday Morning Change
Robert Half (NYSE: RHI)	+0.15%
Korn Ferry (NYSE: KFY)	-0.51%
Monster Worldwide (NYSE: MWW)	-6.8%
Manpower (NYSE: MAN)	-1.5%
Kelly Services (Nasdaq: KELYA)	+0.15%
CTPartners Executive Search (NYSE: CTP)	-0.74%
On Assignment (Nasdaq: ASGN)	+1.3%

The wide variance in the movement of these shares is likely due to the noise in the weekly economic report discussed here, and also due to the dynamics of specific service providers. For instance, Kelly Services, a provider of mostly temporary workers, tends to move counter to the shares of executive search firms, some of which are listed here. This is because of the propensity of employers to choose between temporary and full-time workforce depending on their perspective of the economic outlook. I would say the stock action depicted here says investors are suspicious of how much impact Sandy has had to the week’s data and what is due to real ongoing economic issue. Only the weeks ahead and its less noisy data will give the market the answer it seeks today, so stay tuned as we cover it here.

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