Authored by Simon White, Bloomberg macro strategist,
A pervasive deterioration in continuing claims data across US states is consistent with a recession beginning very soon.
Historically a recession should mean stocks making new lows, but this cycle is proving odd, and this should not be taken as read. Very reliable -- and one very rare --technical signals point to a long-term constructive outlook for US equities.
Jobless claims is one of the most important data points currently. Gauging when the weakening in the jobs market begins to accelerate is crucial in discerning when the Fed will likely cut rates. Claims are one of most leading of labor-market series, and they are high-frequency, coming out weekly.
The data is also released by state. Recessions are pronounced downturns, and they are also pervasive, spreading across industry and the country. One of the early signs of a recession is when multiple states start to see weaker jobs-market conditions at the same time.
I normally track how initial claims are behaving across the US -- they are very close to levels that normally mean a recession is just around the corner. But the series can be a little noisy.
So I took a look at continuing claims by state, and this gives a much more stable series. The picture is unassailable. The percentage of states with continuing claims rising more 30% on an annual basis has never reached its current level and not gone on to rapidly spike much higher, and this has always happened concurrent with a recession.
This comes at the same time as multiple other less timely indicators have been highlighting recession risk is very high.
We’ll get another read on claims today, with the change in seasonal factors last week ensuring initial claims will stay elevated compared to their pre-adjustment values, while WARN notices have been pointing to elevated claims for some time.