The economic climate is about to change. Additional concerns like rising jobless claims and very strict margin maintenance requirements are leaving investors and employees in limbo. First-time claims for unemployment benefits are up sharply from this time a year ago. This hammers home a growing and concerning trend and leaves the workforce facing an uncertain future. At the same time, large companies are required to give notice of mass layoffs in advance, underscoring the sea change that’s continuing to wash over the labor market.
This marks the first time since late December that initial jobless claims have increased year-over-year. This new development should sound the alarms about the continuing precarious state of the labor market. The national “WARN factor” is still very elevated relative to past expansion cycles. As it stands, the WARN Act requires that employers with 100 or more workers must issue written notice at least 60 days in advance of any mass layoff. These alerts are an important early warning indicator of future job cuts.
According to the latest JOLTS data, even with this recent uptick in jobless claims, the rate of involuntary separations is still near record lows. Over the last eight months, this rate has ranged from 1.0% to 1.1%, indicating a display of resilience from employment strength. Meanwhile, experts are cautioning that first timers is spiking. If this trend continues, estimates ranging from 255,000 to 265,000 run-rate might start to stop payroll expansion.
These job security concerns pose a threat to everyone. Concurrently, our brand new financial sector is faced with a toxic mix of increasing pressure to sustain margins. Today, there are more than 500 companies acting as NASDAQ Market Makers, helping support a large swath of trading activity while boosting market liquidity. Now, much higher margin maintenance requirements affect certain shorted stocks. This flip is especially hard for businesses in the Internet, e-commerce and high-tech industries.
Investors who are engaging in margin-related trading should be in the know! That’s because the minimum requirement has been raised. It is currently the lesser of $2000, 50% of the purchase price of eligible securities purchased on margin, or 50% of the proceeds from short sales. This change is intended to reduce the ultimate financial risks to taxpayers from market fluctuations. Some of these stocks even have an original and maintenance requirement as high as 70% due to the increased risk nature of these stocks.
Those that don’t meet these margin maintenance requirements as they are now structured suffer drastic penalties. Accounts that do not comply will be frozen for a period of 90 days, limiting trading options and flexibility for investors. If you believe your favorite stock has a higher margin maintenance requirement, call 1-800-TRADERS. They’re ready to assist you with all your reporting mystery busting needs!
The lessons of today’s economic reality highlight the dynamic relationship between labor market trends and financial regulations. With jobless claims increasing and margin requirements being squeezed, employees and investors both need to find their way in a complex world.
“There is a chance that your order may have already been executed, but due to delays at the exchange, not yet reported.” – Wells Fargo Investments