Creepy Crawly Claims Sneaking Up On You

|
 |  Includes: BAC, DIA, HPQ, IBM, KELYA, KR, MAN, MCD, MWW, PEP, RHI, SHLD, SPY, TGT, UPS, WMT
by: Markos Kaminis

The latest Weekly Initial Jobless Claims data was creepy crawly as it crept up 6,000, to 386K in the week ending June 9. It made my skin all itchy just thinking about how close it's getting to 400K. I had a flashback of that bad dream of an Employment Situation Report that scared the living daylights out of the market a couple weeks ago. Now I'm having a brand new nightmare, and it's about recession.

Bear with me as I review the fearful facts for you. The flow of new benefits filers increased over a revised higher prior month count, which also crept up by 3,000. The tally surprised economists in a bad way too, as they were looking for 375K this week, according to Bloomberg. The four-week moving average only darkened the image, rising by 3,500 to reach 382K for the most recent period.

On the surface, the news wasn't all negative, though it was all bad in my opinion. For instance, insured unemployment stayed at a rate of 2.6% in the lagged period ending June 2. Though, that's probably mostly due to the expiration of benefits, not folks finding work. Likewise, the number of Americans receiving benefits of some sort dropped by 145,990 in the period ending May 26. The pool of poor souls receiving benefits from all programs, including the extensions program was thus better at 5.8 million. Again though, it's probably because they've used up their 99 weeks of extended benefits in my view. The Employment Situation Report is not giving evidence of something otherwise.

Unfortunately, I think the data shows a creepy crawly labor market making its way toward recession. Stocks rose Thursday despite a set of nightmarish market drivers, including the soft economic data and an early shock from Europe. In my view, it found its way to sunlight due to betting that the EU's PIIGS will escape slaughter. The SPDR S&P 500 (NYSE: SPY) ended higher by 1.1% and the SPDR Dow Jones Industrial Average (NYSE: DIA) found 1.2% relief. Even the shares of key employment services firms rose on the day, except Korn Ferry (NYSE: KFY), which fell on its own earnings news. The others, including Monster Worldwide (NYSE: MWW), Robert Half International (NYSE: RHI), Manpower (NYSE: MAN) and Kelly Services (OTC: KELYA) gained between 0.8% and 1.6% on the day. Granted, they had been beaten back a bit before the relief rally. Unfortunately, I think they'll be black and blue, or red, again soon.

America's ten most important employers were all in the green Thursday as well, despite this relative news. This list of American notables includes Wal-Mart (NYSE: WMT), IBM (NYSE: IBM), UPS (NYSE: UPS), McDonald's (NYSE: MCD), Target (NYSE: TGT), Kroger (NYSE: KR), Hewlett-Packard (NYSE: HPQ), Pepsico (NYSE: PEP), Sears (NASDAQ: SHLD) and Bank of America (NYSE: BAC). Like with regard to the employment services firms, investors focused more on what seems to be the aversion of trouble in Europe than the latest jobless claims creep. I expect stocks will continue rising through the start of next week, but before long, I expect that sell itch to return as economic data keeps creeping us out.

For your information:

Extended benefits were available in the District of Columbia, Idaho, Nevada, New Jersey, New York, Rhode Island, and West Virginia during the week ending May 26.

The highest insured unemployment rates in the week ending May 26 were in Alaska (4.6), Puerto Rico (3.7), Pennsylvania (3.5), Illinois (3.4), California (3.3), New Jersey (3.3), Oregon (3.2), Nevada (2.9), Rhode Island (2.9), Massachusetts (2.8), and New York (2.8).

The largest increases in initial claims for the week ending June 2 were in Oregon (+975), Virginia (+838), New Mexico (+531), Wisconsin (+213), and Nevada (+189), while the largest decreases were in California (-4,168), North Carolina (-2,683), Texas (-1,854), Massachusetts (-1,373), and Georgia (-1,367).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.