Over the past few weeks, initial jobless claims have been fairly elevated in the 800K range and moving higher.  Last week’s reading came in at the highest level since the first week of September and was revised even higher this week to 892K (compared to 885K originally). While claims remain elevated, they improved in a big way this week.  Claims were expected to drop to 880K, but instead, claims saw their largest one-week decline since the last week of August, falling to 803K.

As we noted last week, on an unadjusted basis claims were lower thanks likely to seasonal effects.  The current week of the year’s seasonal effect was not quite as strong, but it marked another decline in the non-seasonally adjusted number nonetheless.  Unadjusted claims came in at 869.4K from 941.9K last week. Again, although this was an improvement, claims are still coming in at some of the highest levels of the past few months.

Including other programs, it is the same story.  Regular state claims in combination with Pandemic Unemployment Assistance (PUA) claims were lower dropping to 1.267 million from 1.396 million.  While lower, outside of the prior two weeks, that is still the highest level since the last week of September.  The decline this week was broad with both regular state claims and PUA claims falling sequentially.

Continuing claims are lagged an additional week to initial claims meaning the most recent reading is for the week of December 11th; the same week as initial claims recent high of 892K.  In spite of that week’s big inflow into the unemployment insurance system, continuing claims actually fell 170K to a pandemic low of 5.337 million.

As we have frequently made note of recently, the continuing claims number does not tell the full story though.  Including all programs adds another week’s lag but gives a more complete picture.  Total continuing claims across all programs for the week of December 4th totaled 20.4 million. While that was lower sequentially, it was also above the pandemic low of 19 million from the week of November 20th.  Breaking this number down by program, while regular state claims are around their lows of the pandemic, PUA claims have risen for two straight weeks and are back up to where they stood in October. Meanwhile, extension programs remain elevated.  Pandemic Emergency Unemployment Compensation (PEUC) did fall week over week, although at those levels, the reading was above all but one other week since the pandemic started. Conversely, the Extended Benefits program saw an uptick to a new pandemic high of 712.9K.  Click here to view Bespoke’s premium membership options for our best research available.

Yesterday’s Existing Home Sales data from the National Association of Realtors for the month of November continued to impress.  As discussed in last night’s Closer, Existing Sales came in at 6.69 million SAAR. Although lower, snapping a streak of five straight months of increases, sales continue to come in at some of the highest levels since 2006.  With sales running at such a strong clip recently, inventory numbers have been nothing short of remarkable: there are only 1.32 million listed units nationally with 1.12 million single-family homes listed.  Both respective readings are the lowest levels of the past two decades.  Even with declines in volumes, the ongoing collapse in inventory levels has driven the number of units in inventory down to 2.37 months’ sales (only 2.25 months for single family homes), a new record low.  We should note that implied new listings have indeed risen. They stand in the mid-6mm SAAR range, the highest since 2007 but still about 20% below the 8mm range that they hit in the mid-2000s. While prices are still extremely high, they did drop sequentially on the month thanks most likely to a shift in mix towards lower value homes.  Click here to view Bespoke’s premium membership options for our best research available.

Whereas other regional Fed manufacturing readings like the Empire and Philly Fed were weaker than expected for December, today’s release from the Richmond Fed was a welcome surprise. Rather than the forecasted decline down to 11 from 15 in November, the headline number rose to a reading of 19.  Although that is still off the record highs from earlier in the fall, the December print indicated that manufacturing activity in the region continued to grow at an accelerated and still historically strong rate.

As shown in the table below, this month’s reading moved back into the top decile of all readings since 1993. As for the individual components, New Orders, Backlog of Orders, Vendor Lead Times, Number of Employees, Wages, and Average Workweek also all came in the top decile of historical readings.  On the other hand, current condition indices covering expenditures, inventories, and Local Business Conditions remain much weaker relative to their historical range.

Breadth was broadly positive this month with only a small handful of indices falling month over month.  Of those that fell, the most glaring decline was for Local Business Conditions.  Its 17-point decline was the 8th largest on record. Granted, the index remained positive, but it was at a much slower pace than November. The indices for future expectations were generally weaker than November with a higher number of indices falling in December.

Demand has appeared to continue to recover with New Orders and Backlog of Orders both coming in at another strong expansionary reading in December.  In fact, the Backlog of Orders index rose to the highest level since June 2018 which is also in the top 2% of all readings.  Despite this, Shipments were lower falling 8 points to 12.  That means shipments continued to rise in December but at a slower pace. Given the uptick in New Orders and Order Backlogs, that slowdown in Shipments could be more of a supply rather than a demand problem.

Some evidence of this is the index for Vendor Lead Times.  Higher readings in this index indicate that suppliers are taking a longer time to get products to manufacturers.  Vendor Lead Times are in the top 2% of all readings rising another 14 points to 31 in December.  That 15-point increase was the largest since March when the index rose by 17 points.  Before that, you would need to go all the way back to June of 1996—in the early days of the index when readings were all over the pace—to find another time that the index has risen by more in just one month.

The indices covering employment painted a positive picture for the region’s labor market with Number of Employees and Average Workweek both rising 7 points back up to their recent highs from a couple of months ago. While firms are taking on more people and lengthening the hours worked, they also report having trouble hiring the right people.  The index for Availability of Skills remains around historically low levels even after rising 5 points in December.  Given that tight labor market sign, the index for Wages also rose 7 points up to its highest level since May of last year.  As with the indices for Number of Employees and Average Workweek, the increase this month in Wages leaves each of these indices in the upper percentiles of their historic ranges. Click here to view Bespoke’s premium membership options for our best research available.