Will Low Quality Lose Again?

It’s not the spring yet, but jobless claims have started the decline we predicted would occur in the spring. The prior week’s claims were revised up 9,000 to 754,000. However, in the week of March 6th, initial claims fell to 712,000 which was 13,000 below estimates.

As you can see from the chart below, non-seasonally adjusted claims were down from 757,000 to 709,000 which is the lowest reading of the cycle. It should continue making new lows in the next few months. This decline was counteracted by the massive spike in PUA claims from 436,000 to 478,000. That’s the 2nd highest reading since early October. However, this increase was due in part to a 16,000 rise in Ohio’s PUAs which might not reflect reality.

There are now a ridiculous 262,000 PUAs in Ohio. It’s implausible for Ohio to have over half the nation’s PUAs. Ohio only has 11.69 million people which is 3.6% of America’s population. Once Ohio’s data normalizes, the total of PUAs and initial claims will fall below 1 million for the first time of the cycle. Continued claims fell from 4.337 million to 4.144 million in the week of February 27th. That was the largest weekly decline since January 9th. In the week of February 20th, the total number of people on all benefits programs rose from 18 to 20.1 million. If the stimulus didn’t pass, millions would be in trouble. This total will finally start declining once we get the data from March starting in 2 weeks.

Fed Rate Hikes

The market continues to price in more rate hikes and for them to start sooner. The chart on the left is unique, but very informative. We’ve never seen a chart with dates on both axes. The Y-axis shows the estimated point when the Fed is expected to start hiking rates. The X-axis shows the regular date. It shows in August the market didn’t expect rate hikes until 2025. That was when cyclical stocks were weak and secular growth stocks were very strong.

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