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Thursday, March 11, 2010

Aw, Heck, Initial Claims

Today's initial claims number is a bit of a drop, but the four-week moving average moved up again to 475,500.

The moving average is composed of the seasonally-adjusted number. It is true that seasonal adjustments are not perfect, but they are quite good, and that's what you have to use (with some caveats for a few periods in which SA can distort due to calendar changes, such as spring breaks). The bottom line is that these numbers are very high when you look at them with the mindset that we are entering the tenth month of recovery from an exceptionally deep recession.

If we threw out the high and low SA numbers over the last four weeks (498,000 and 462,000) we would still be left with 474,000 and 469,000. That does not change the picture much, does it?

I'll make a graph later comparing the 82 period with this one, but now I am going to spend a few disconsolate moments holding my head and groaning. The effect of the precious, life-giving fluid this morning was just completely destroyed by this number.

The Census jobs are going to help monthly employment reports for months to come, but the problem is that those jobs are not structurally a part of the economy, while these layoffs are. The Census jobs will evaporate from the economy like a tenth of an inch of rain in a Georgia drought in July.

PS: See this Bloomberg article about Treasuries - the long end of the market appears saturated. Note the (snort) historical comparison:
Thirty-year bonds yield 3.78 percentage points more than two-year notes. The gap reached 3.85 percentage points on Feb. 17, the most since at least 1980, according to data compiled by Bloomberg.

“We have so much supply in the long end of the curve that this could make it a more difficult auction,” said Niels From, chief analyst at Nordea Bank AB in Copenhagen. “We could see yields going higher.”

The 30-year security will probably yield 4.75 percent by the end of June, compared with 1.1 percent for the two-year note, according to From. Similar-maturity German bunds will yield 4 percent and 1.2 percent, respectively, From said.
First, any comparison to 1980 is kind of uncomfortable at this point. Really uncomfortable. Second, when you compare Treasury yields to mortgage rates, it kind of jumps out at you that there is a discrepancy. A huge discrepancy.

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