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198 matches for "jobless claims":
On the face of it, the upturn in initial jobless claims since late September appears to signal a softening in the economy.
We have learned over the years not to become too excited in the face of swings in the jobless claims numbers, even when the movement appears to persist for a month or two.
The recent jobless claims numbers have been spectacularly good, with the absolute level dropping unexpectedly in the past two weeks to a 43-year low. The four-week moving average has dropped by a hefty 14K since late August.
The 62K jump in jobless claims for the week ended September 2 is a hint of what's to come. Claims usually don't surge until the second week after major hurricanes, because people have better things to do in the immediate aftermath, so we are braced for a further big increase next week.
The jobless claims numbers today likely will mark the end of the calm before the storm effect, even though the data cover the week ended September 1, and Harvey hit on August 26.
In one line: Trade deficit has stabilized, provided the China talks don't fall apart.
In one line: The trend is back to the cycle low.
In one line: The calm before the export storm?
Yesterday's consumer sentiment data provided further evidence of a strengthening French economy, amid signs of cracks in the otherwise solid German economy.
In one line: Decent July means net foreign trade unlikely to be a big drag on Q3 GDP growth.
In one line: Solid, but it won't last.
In one line: Policy uncertainty is not lifting layoffs.
In one line: Nothing to lose sleep over.
In one line: Looks bad, but the trend is not--yet--running at 0.3% per month.
In one line: Claims noise likely insignificant; hefty upward revisions to Q1 capex.
In one line: Philly surge looks great, but it's not definitive.
In one line: Healthcare inflation is accelerating; will it be sustained?
In one line: The trend remains stable and very low.
In one line: Trade will be a small drag on Q2 GDP growth.
In one line: A correction; the trend is stable, for now.
In one line: Core orders soft, but likely to be even softer in Q4.
In one line: Little sign of the feared trade hit on Q2 GDP growth, so far.
In one line: The trend is low and stable; all the payroll slowdown is due to reduced hiring activity.
In one line: Expect a rebound in the October core; too late to prevent a Fed easing this month.
The weekly jobless claims numbers tend to be choppy around the turn of the year, and our take on the seasonal adjustments points to a clear increase in today's report, for the week ended January 11, even without the impact of the government shutdown.
Today brings an array of economic data, including the jobless claims report, brought forward because July 4 falls on Thursday.
We're expecting a hefty increase in February payrolls today, but even a surprise weak number likely wouldn't prevent a rate hike next week. The trends in all the private sector employment surveys are strong and improving, and jobless claims have dropped to new lows too, though we think that's probably less important than it appears.
Leading indicators all point to a solid August payroll number. Survey-based measures of the pace of hiring signal a 200K-plus increase, and jobless claims--a proxy for the pace of gross layoffs--are at a record low as a share of the workforce.
We were pretty sure that the underlying trend in jobless claims had bottomed, in the high 230s, before the hurricanes began to distort the data in early September.
All the fundamentals point to a very strong payroll number for May. The NFIB hiring in tentions index, the best single leading indicator of payrolls five months ahead, signalled back in December that May employment would rise by about 300K. The NFIB actual net hiring number, released yesterday, is a bit less bullish, implying 250K, but the extraordinarily low level of jobless claims, shown in our first chart, points to 300K. Finally, the ISM non-manufacturing employment index suggests we should be looking for payrolls to rise by about 260K. Our estimate is 280K.
After three straight lower-than-expected jobless claims numbers, we have to consider, at least, the idea that maybe the trend is falling again. This would be a remarkable development, given that claims already are at their lowest level ever, when adjusted for population growth, and at their lowest absolute level since the early 1970s.
We don't directly plug the ADP employment data into our model for the official payroll number. ADP's estimate is derived itself from a model which incorporates lagged official payroll data, because payrolls tend to mean-revert, as well as macroeconomic variables including oil prices, industrial production and jobless claims -- and actual employment data from firms which use ADP's payroll processing services.
Behind all the talk of slowdowns and Fed pauses, we see no sign that the labor market is loosening beyond a very modest uptick in jobless claims, and even that looks suspicious.
The question of what's really happening to the pace of layoffs is still unanswered, despite the apparent upturn over the past couple of months. The weekly jobless claims numbers are only just emerging from the fog of the usual holiday season chaos. The pattern of pre-holiday hiring and post-holiday layoffs is broadly the same each year, but Christmas and New Year's Day fall on a different day each year, making seasonal adjustment difficult.
Initial jobless claims, a sign of the pace of layoffs, dropped to a seasonally-adjusted 265,000 in the week ending Jan 24, a hefty decline of 43,000 from the prior week's slightly upwardly revised level of 308,000
Chief US Economist Ian Shepherdson on today's Inital Jobless Claims data
Chief U.S. Economist Ian Shepherdson on U.S. Jobless Claims
The third estimate of first quarter GDP growth, due today, will not be the final word on the subject. Indeed, there never will be a final word, because the numbers are revised indefinitely into the future.
Net foreign trade was a drag on GDP growth in the second quarter, subtracting 0.7 percentage points from the headline number.
We have been waiting a long time to see signs that business investment spending is becoming less reliant on movements in oil prices.
Yesterday's November inflation reports from Germany and Spain suggest that today's data for the Eurozone as a whole will undershoot the consensus.
Recent export performance has been poor, but the export orders index in the ISM manufacturing survey-- the most reliable short-term leading indicator--strongly suggests that it will be terrible in the fourth quarter.
After three straight 1.3% month-to-month increases in core capital goods orders, we are becoming increasingly confident that the upturn in business investment signalled by the NFIB survey is now materializing.
The Fed is on course to hike again in December, with 12 of the 16 FOMC forecasters expecting rates to end the year 25bp higher than the current 2-to-21⁄4%; back in June, just eight expected four or more hikes for the year.
The disappearance from the FOMC statement of any reference to global risks, which first appeared back in September, was both surprising and, in the context of this cautious Fed, quite bold. After all, one bad month in global markets or a reversal of the jump in the latest Chinese PMI surveys presumably would force the Fed quickly to reinstate the global get-out clause. So, why drop it now?
Our base case forecast has core PCE inflation at 1.9% from November 2018 through July this year.
Reporting on the German labour market has been like watching paint dry in this expansion, but yesterday's data were a stark exception to this rule.
With almost two thirds of the nominal data for the third quarter now available, we can make a stab at the contribution of inventories to real GDP growth.
Speeches by Chair Yellen and Vice-Chair Fischer give the two most important Fed officials the perfect platform today to signal to markets whether rates will rise this month.
ADP's report that September private payrolls rose by 135K was slightly better than we expected, but not by enough to change our 150K forecast for tomorrow's official report.
We're braced for a hefty downside surprise in today's durable goods orders numbers, thanks to a technicality.
We're fully expecting to see a hit to September payrolls from Hurricane Florence, which struck during the employment survey week.
We aren't convinced by the idea that consumers' confidence will be depressed as a direct result of the rollover in most of the regular surveys of business sentiment and activity.
Friday's advance GDP data provided the first solid evidence of a Q1 slowdown in the euro area economy.
The FOMC delivered no big surprises yesterday, but seemed keen to make it clear that policymakers are sticking to their core views, despite the slowdown in growth in the first quarter. Unlike the March statement, yesterday's note pointed out that the slowdown came in the winter months, though it did not directly blame the weather for the sluggishness in growth.
The stock market loved Fed Chair Powell's remarks on the economy yesterday, specifically, his comment that rates are now "just below" neutral.
The alarming-looking decline in core capital goods orders since late 2014 has been substantially due, in our view, to the rollover in investment in the mining sector. But the 29% jump in the number of oil rigs in operation, since the mid-May low, makes it clear that the collapse is over.
If the recovery in existing homes hadn't been interrupted by the taper tantrum, in the spring of 2013, sales by now would likely be running at an annualized rate in excess of 6M. The rising trend in sales from late 2010 through early 2013 was strong and stable, as our first chart shows, but the decline was steep after the Fed signalled it would soon slow the pace of QE, and it was made temporarily worse by the severe late fall and early winter weather.
It's going to be very hard for Fed Chair Powell's Jackson Hole speech today to satisfy markets, which now expect three further rate cuts by March next year.
The stage is set for the Fed to ease by 25bp today, but to signal that further reductions in the funds rate would require a meaningful deterioration in the outlook for growth or unexpected downward pressure on inflation.
A couple of Fed speakers this week have described the economy as being at "full employment". Looking at the headline unemployment rate, it's easy to see why they would reach that conclusion.
New home sales are much more susceptible to weather effects -- in both directions -- than existing home sales. We have lifted our forecast for today's February numbers above the 575K pace implied by the mortgage applications data in recognition of the likely boost from the much warmer-than-usual temperatures.
The nominal value of orders for non-defense capital equipment, excluding aircraft, fell by 3.4% last year. This was less terrible than 2015, when orders plunged by 8.4%, but both years were grim when compared to the average 7.5% increase over the previous five years.
New home sales have tended to track the path of mortgage applications over the past year or so, with a lag of a few months. The message for today's January sales numbers, show in our next chart, is that sales likely dipped a bit, to about 525K.
The 17-point leap in the Richmond Fed index for October, reported yesterday, was startlingly large.
The recovery in existing home sales appears to have stalled, at best.
Core durable goods orders have not weakened as much as implied by the ISM manufacturing survey, as our first chart shows, but it is risky to assume this situation persists.
We see significant upside risk to today's headline durable goods orders numbers for April.
The gaps in the third quarter GDP data are still quite large, with no numbers yet for September international trade or the public sector, but we're now thinking that growth likely was less than 11⁄2%.
All eyes will be on the core PCE deflator data today, in the wake of the upside surprise in the January core CPI, reported last week. The numbers do not move perfectly together each month, but a 0.2% increase in the core deflator is a solid bet, with an outside chance of an outsized 0.3% jump.
The FOMC minutes confirmed that most FOMC members were not swayed by the weak-looking first quarter GDP numbers or the soft March core CPI. Both are considered likely to prove "transitory", and the underlying economic outlook is little changed from March.
Neither of the major economic reports due today will be published on schedule.
If you wanted to be charitable, you could argue that the downturn in the rate of growth of core durable goods orders in recent months has not been as bad as implied by the ISM manufacturing survey.
Fed Chair Yellen speaks at Jackson Hole today, at 10:00 Eastern. Her topic is billed as "financial stability", but that does not necessarily preclude remarks on the outlook for the economy and policy.
Three of today's economic reports, all for December, could move the needle on fourth quarter GDP growth. Ahead of the data, we're looking for growth of 1.8%, a bit below the consensus, 2.2%, and significantly weaker than the Atlanta Fed's GDPNow model, which projects 2.8%.
We have argued frequently that the ADP employment report is not a reliable advance payroll indicator--see our Monitor of May 4, for example-- so for now we'll just note that it is generated by a regression model which includes a host of nonpayroll data and the official jobs numbers from the previous month. It is not based solely on reports from employers who use ADP for payroll processing, despite ADP's best efforts to insinuate that it is.
The latest iteration of the Atlanta Fed's GDPNow model of second quarter GDP growth shows the economy expanding at a 4.5% annualized rate.
ADP's report of a 235K increase in private payrolls in February is not definitive evidence of anything, but it is consistent with the idea that labor demand remains very strong.
Markets clearly love the idea that the "Phase One" trade deal with China will be signed soon, at a location apparently still subject to haggling between the parties.
Our core view on the May payroll number remains that the single most likely cause of the unexpectedly modest increase is a seasonal adjustment error, triggered when the survey is conducted early in the month.
We're hearing a good deal of speculation about the dotplot after next week's FOMC meeting, with investors wondering whether the median dot will rise in anticipation of the increased inflation threat posed by substantial fiscal loosening under the new administration. We suspect not, though for the record we think that higher rate forecasts could easily be justified simply by the tightening of the labor market even before any stimulus is implemented.
We've been hearing a good deal about the slowdown in the rate of growth of consumer credit in recent months, and with the April data due for release today, it makes sense now to reiterate our view that the recent numbers are no cause for alarm.
One bad month proves nothing, but our first chart shows that October's auto sales numbers were awful, dropping unexpectedly to a six-month low.
If the Fed needed further encouragement to raise rates next month, it arrived Friday in the form of solid jobs numbers, a new cycle low for the broad unemployment rate, and a new cycle high for wage growth.
The Fed today will do nothing to rates and won't materially change the language of the post-meeting statement.
We argued yesterday that the steep declines in the ISM surveys in August, both manufacturing and services, likely were one-time events, triggered by a combination of weather events, seasonal adjustment issues and sampling error. These declines don't chime with most other data.
Convention dictates that we lead with yesterday's Fed meeting, but it's hard to argue that it really deserves top billing.
Inventories subtracted 1.3 percentage points from headline GDP growth in the second quarter and were by far the biggest constraint on the economy. This was the fifth straight drag from inventories, but it was more than twice the average hit over the previous year.
Today brings only the preliminary Michigan consumer sentiment data for January so we want to take some time to look at how recent changes to Medicare Part B premiums, which cover doctors' fees, are likely to affect inflation over the next few months.
We'd be quite surprised if the headline payroll number today turned out to be far from the consensus, 205K, or our forecast, 225K.
We expected a consensus-beating ADP employment number for February, but the 298K leap was much better than our forecast, 210K. The error now becomes an input into our payroll model, shifting our estimate for tomorrow's official number to 250K; our initial forecast was 210K.
Total real inventories rose at a $48.7B annualized rate in the fourth quarter, contributing 1.0 percentage points to headline GDP growth. Wholesale durable goods accounted for $34B of the aggregate increase, following startling 1.0% month-to-month nominal increases in both November and December. The November jump was lead by a 3.2% leap in the auto sector, but inventories rose sharply across a broad and diverse range of other durables, including lumber, professional equipment, electricals and miscellaneous.
The rollover in bank lending to commercial and industrial companies probably is over. On the face of it, the slowdown has been alarming, with year-over-year growth in the stock of lending slowing to just 2.6% in April, from a sustained peak of more than 10% in the early part of last year.
The collapse in capital spending in the oil sector last year was the biggest single drag on the manufacturing sector, by far. The strong dollar hurt too, as did the slowdown in growth in China, but most companies don't export anything. Capex has fallen in proportion to the drop in oil prices, so our first chart strongly suggests that the bottom of the cycle is now very near.
The hawks clearly tried hard to persuade their more nervous colleagues to raise rates yesterday. In the end, though, they had to make do with shifting the language of the FOMC statement, which did not read like it had come after a run of weaker data.
The startling November international trade numbers, released yesterday, greatly improve the chance that the fourth quarter saw a third straight quarter of 3%- plus GDP growth.
We have been telling an upbeat story about the EZ economy in recent Monitors, emphasizing solid services and consumers' spending data.
We set out in detail yesterday, here, why we think the official payroll number today will be better than the 129K ADP reading; we look for 160K.
Markets and the commentariat seemed not to like the April ADP employment report yesterday but we are completely indifferent. We set out in detail in yesterday's Monitor the case for expecting a below consensus ADP reading--in short, the model used to generate the number includes lagging official data, some of which were hugely depressed by the early Easter--so it does not change our 200K forecast for tomorrow's official number.
The ADP employment report suggests that the hit to payrolls from Hurricane Florence was smaller than we feared, so we're revising up our forecast for the official number tomorrow to 150K, from 100K.
For analysts with a broadly positive view of the U.S. economy, it is tempting to argue that the slowdown in payroll growth this year reflects supply constraints, as the pool of qualified labor dries up.
Yesterday's advance CPI data in Germany suggest that inflation fell slightly in August.
On the face of it, the February consumer spending data, due today, will contradict the upbeat signal from confidence surveys. The dramatic upturn in sentiment since the election is consistent with a rapid surge in real consumption, but we're expecting to see unchanged real spending in February, following a startling 0.3% decline in January.
The unexpectedly robust 128K increase in October payrolls--about 175K when the GM strikers are added back in--and the 98K aggregate upward revision to August and September change our picture of the labor market in the late summer and early fall.
The simultaneous decline in both ISM indexes was a key factor driving markets to anticipate last week's Fed easing.
The ADP employment report for September showed private payrolls rose by 135K, trivially better than we expected.
Labor demand appears to have remained strong through August, so we expect to see a robust ADP report today.
Over the past six months, payroll growth has averaged exactly 150K. Over the previous six months, the average increase was 230K. And in the six months to August 2015--a fairer comparison, because the fourth quarter numbers enjoy very favorable seasonals, flattering the data--payroll growth averaged 197K.
We're sticking to our 220K forecast for today's official payroll number, despite the slightly smaller-than- expected 179K increase in the ADP measure of private employment.
Productivity growth reached the dizzy heights of 1.8% year-over-year in the second quarter, following a couple of hefty quarter-on-quarter increases, averaging 2.9%.
The rebound in the ISM non-manufacturing index in February was in line with our forecast, but behind the strong headline, the employment index dropped to an eight-month low.
The shock of the weak May payroll report means that the June numbers this week will come under even greater scrutiny than usual. We are not optimistic that a substantial rebound is coming immediately. The headline number will be better than in May, because the 35K May drag from the Verizon strike will reverse.
The pushback from within the President's own party against the proposed tariffs on Mexican imports has been strong; perhaps strong enough either to prevent the tariffs via Congressional action, or by persuading Mr. Trump that the idea is a losing proposition.
Today's wave of economic reports are all likely to be strong. The most important single number is the increase in real consumers' spending in July, the first month of the third quarter.
We would like to be able to argue with conviction that the surge in June housing starts and building permits represents the beginning of a renewed strong upward trend, but we think that's unlikely.
The April CPI report today will be watched even more closely than usual, after the surprise 0.12% month-to-month fall in the March core index. The biggest single driver of the dip was a record 7.0% plunge in cellphone service plan prices, reflecting Verizon's decision to offer an unlimited data option.
If the Phase One trade deal with China is completed, and is accompanied by a significant tariff roll-back, we'll revise up our growth forecasts, but we'll probably lower our near-term inflation forecasts, assuming that the tariff reductions are focused on consumer goods.
It's pretty easy to dismiss back-to-back 0.3% increases in the core CPI, especially when they follow a run of much smaller gains.
The announcement, late Tuesday, that the administration plans to impose 10% tariffs on some $200B-worth of imports from China raises the prospect of a substantial hit to the CPI.
The downside surprise in the November core CPI, which rose by 0.1%, a tenth less than expected, was due entirely to an unexpected 1.3% drop in apparel prices. This alone subtracted 0.05% from the core, but we think the chance of a reversal in December is quite high.
You might remember that the December retail sales report surprised significantly to the downside, thanks to the impact of falling gasoline prices. The data are reported in nominal dollars, not volumes, so falling prices depress the numbers.
As far as we can tell, most forecasters expect the impact of fiscal stimulus this year to be gradual, with perhaps most of the boost to growth coming next year. At this point, with no concrete proposals either from the new administration or Congress, anything can happen, and we can't rule out the idea of a slow roll-out of tax cuts and spending increases.
Whatever happened to consumers' sentiment in March, the level of University of Michigan's index will be very high, relative to its long-term average.
Core inflation probably will remain close to June's 2.3% rate for the next few months.
Today brings a huge wave of data, but most market attention will be on the June CPI, following the run of unexpectedly soft core readings over the past three months.
The details of the substantial pay raises being offered to some 18K JP Morgan employees over the next three years are much less important than the signal sent by the company's response to the tightening labor market. In an economy with 144M people on payrolls, hefty raises for JP Morgan employees won't move the needle in the hourly earnings data.
So, what should we make of the fourth straight disappointment in the retail sales numbers? First, we should note that all is probably not how it seems. The 0.2% upward revision to March sales was exactly equal to the difference between the consensus forecast and the initial estimate, neatly illustrating the danger of over-interpreting the first estimates of the data.
We argued earlier this week that the data on the consumer economy are likely to be rather stronger than the industrial numbers.
Now that the run of unfavorable base effects in the core CPI--triggered by five straight soft numbers last year--is over, we're expecting little change in the year- over-year rate through the remainder of this year.
The consensus forecast for the October core CPI, which will be reported today, is 0.2%. Take the over. Nothing is certain in these data, but the risk of a 0.3% print is much higher than the chance of 0.1%.
The trend rate of increase in private payrolls in the months before Hurricane Katrina in 2005 was about 240K per month.
The sluggishness of consumers' spending and business investment in the first quarter means that hopes of a headline GDP print close to 2% rely in part on the noisier components of the economy, namely, inventories and foreign trade.
The month-to-month core CPI numbers in March were consistent, in aggregate, with the underlying trend.
The latest batch of FOMC speakers yesterday, together with the December minutes--participants said "the committee could afford to be patient about further policy firming"--offered nothing to challenge the idea, now firmly embedded in markets, that the next rate hike will come no sooner than June, if it comes at all.
We've had some correspondence questioning our view on the "weakness" of February hourly earnings, which we firmly believe were depressed by a persistent calendar quirk. Almost nine times in 10 over the past decade, when the 15th of the month has fallen after the week of the 12th--the payroll survey week--the monthly gain in wages has undershot the prior trend.
The headline April CPI, due today, will be boosted slightly by rising gasoline prices.
The continued modest rate of increase in unit labor costs makes it hard to worry much about the near-term outlook for core inflation.
The first of this week's two July inflation reports, the PPI, will be released today. With energy prices dipping slightly between the June and July survey dates, the headline should undercut the 0.2% increase we expect for the core by a tenth or so.
In the wake of the soft-looking ADP employment report released on Wednesday, the true consensus for today's official payroll number likely is lower than the 230K reported in the Bloomberg survey. As we argued in the Monitor yesterday, though, we view ADP as a lagging indicator and we don't use it is as a forecasting tool.
We expect to see a 70K increase in October payrolls today.
Our hopes of a hefty rebound in payrolls in October, following the hurricane-hit September number, have been dashed by the imminent landfall of Hurricane Michael in Florida panhandle.
The medium-term trend in the volume of mortgage applications turned up in early 2015, but progress has not been smooth. The trend in the MBA's purchase applications index has risen by about 40% from its late 2014 low, but the increase has been characterized by short bursts of rapid gains followed by periods of stability.
The undershoot in the September core CPI does not change our view that the trend in core inflation is rising, and is likely to surprise substantially to the upside over the next six-to-12 months.
We'd be surprised to see a repeat today of August's very modest 0.08% increase in the core CPI.
Today brings the April PPI data, which likely will show core inflation creeping higher, with upward pressure in both good and services. The upside risk in the goods component is clear enough, as our first chart shows.
The CPI report due today will be released on schedule, because the Bureau of Labor Statistics, which compiles the data, remains open during the partial government shutdown.
If Fed Chair Yellen's objective yesterday was to deliver studied ambiguity in her Testimony--and we believe it was--she succeeded. She offered plenty to both sides of the rate debate. For the hawks, she noted that unemployment is now "...in line with the median of FOMC participants' most recent estimates of its longer-run normal level", and that inflation is still expected to return to the 2% target, "...once oil and import prices stop falling".
If the CPI measure of core consumer goods inflation were currently tracking the same measure in the PPI in the usual way, core CPI inflation would now be at 2.3%, rather than the 1.7% reported in November.
It's hard to know what to make of the October CPI data, which recorded hefty increases in healthcare costs and used car prices but a huge drop in hotel room rates, and big decline in apparel prices, and inexplicable weakness in rents.
It would not be fair to describe the FOMC as gridlocked, because that would imply no clear way out of the current position. Members' views of the risks to the economy, the state of the labor market, and the degree of inflation risk are all over the map, and the chance of a broad consensus emerging any time soon is slim.
After five straight undershoots to consensus, with the core CPI averaging monthly gains of just 0.05%, investors are asking hard questions about the Fed's belief -- and ours -- that core inflation is headed towards 2% in the not-too-distant future.
In recent client meetings the first and last topic of conversation has been the market implications of the possible departure of President Trump from office.
The FOMC's view of the economic outlook and the likely required policy response, set out in yesterday's statement and Chair Yellen's press conference, could not be clearer.
In the wake of the unexpectedly weak September Empire State survey, released Monday, we are now very keen to see what today's Philadelphia Fed survey has to say.
Usually, we forecast existing home sales from the pending sales index, which captures sales at the point contracts are signed.
The average FICO credit score for successful mortgage applicants has risen in each of the past four months.
The tone of Fed Chair Powell's opening comments at the press conference yesterday was much more dovish than the statement, which did little more than most analysts expected.
The New York Fed tweeted yesterday that "Housing market fundamentals appear strong.
Looking back at the numbers over the past few weeks, it is pretty clear that the gap between the strong payroll reports and the activity data widened to a chasm in the first quarter. We now expect GDP growth of about zero--the latest Atlanta Fed estimate is +0.3% and the New York Fed's new model points to 0.8%--but payrolls rose at an annualized 1.9% rate.
Today brings a wave of data, some brought forward because of Thanksgiving. We are most interested in the durable goods orders report for October, which we expect will show the upward trend in core capital goods orders continues.
After the strong Philly Fed survey was released last week, we argued that the regional economy likely was outperforming because of its relatively low dependence on exports, making it less vulnerable to the trade war.
The most striking feature of the Fed's new forecasts is the projected overshoot in core PCE inflation at end-2019 and end-2020, which fits our definition of "persistent".
The renewed slide in oil prices in recent weeks will crimp capital spending, at the margin, but it is not a macroeconomic threat on the scale of the 2014-to-16 hit.
It would be easy to characterize the Fed as quite split at the July meeting.
Sentiment in the French business sector ended this year on a high. The headline manufacturing index fell slightly to 112 in December, from an upwardly-revised 113 in November, but the aggregate sentiment gauge edged higher to a new cycle high of 112.
Don't bet the farm on today's October payroll numbers, which will be hopelessly--and unpredictably-- compromised by the impact of hurricanes Florence and Michael.
Over the past couple of weeks, the number of applications for new mortgages to finance house purchase have reached their highest level since late 2010, when activity was boosted by the impending expiration of a time-limited tax credit for homebuyers.
The New York Times called the China trade agreement reached Friday "half a deal", but that's absurdly generous.
Tariffs are a tax on imported goods, and higher taxes depress growth, other things equal.
The rate of growth of real personal incomes is under sustained downward pressure, slowing to 2.1% year-over-year in December from 3.4% in the year to December 2015. In January, we think real income growth will dip below 2%, thanks to the spike in the headline CPI, reported Wednesday. Our first chart shows that the 0.6% increase in the index likely will translate into a 0.5% jump in the PCE deflator, generating the first month-to-month decline in real incomes since January last year.
The rate of growth of nominal core retail sales substantially outstripped the rate of growth of nominal personal incomes, after tax, in both the second and third quarters.
The consequences of the collapse in oil prices continue to reverberate through the sector. The number of rigs in operation is still falling rapidly, but the rate of decline is slowing. According to data from Baker Hughes, Inc., an average of 23 rigs per week have ceased operation over the past four weeks, the slowest decline since December.
The 0.8% jump in nominal November retail sales is consistent with a 0.4% rise in real total consumption, which in turn suggests that the fourth quarter as a whole is likely to see a near-3% annualized gain.
The Fed yesterday acknowledged clearly the new economic information of recent months, namely, that first quarter GDP growth was "solid", with Chair Powell noting that it was stronger than most forecasters expected.
Some of the recent labor market data appear contradictory. For example, the official JOLTS measure of the number of job openings has spiked to an all-time high, and the number of openings is now greater than the number of unemployed people, for the first time since the data series begins, in 2001.
We want to be very clear about the terrible-looking December retail sales numbers: The core numbers were much less bad than the headline, and there is no reason to think the dip in the core is anything other than noise.
Yesterday's economic data in the Eurozone were soft.
The GM strike will make itself felt in the September industrial production data, due today.
We can't finalize our forecast for residential investment in the second quarter until we see the June home sales reports, due next week, but in the wake of yesterday's housing starts numbers we can be pretty sure that our estimate will be a bit below zero.
We don't use the index of leading economic indicators as a forecasting tool. If it leads the pace of growth at all, it's not by much, and in recent years it has proved deeply unreliable.
You'd be hard-pressed to read the minutes of the September FOMC meeting and draw a conclusion other than that most policymakers are very comfortable with their forecasts of one more rate hike this year, and three next year.
The declines in headline housing starts and building permits in June don't matter; both were depressed by declines in the wildly volatile multi-family components.
The declines in headline housing starts and building permits in September don't matter; both were driven by corrections in the volatile multi-family sector.
The pace of layoffs might be picking up. Our first chart looks pretty convincing, but it's much too soon to know for sure. The claims data from mid-December through late January are subject to serious seasonal adjustment problems, partly because Christmas falls on a different day of the week each year and partly because the exact timing of post-holiday layoffs varies from year-to-year.
In one line: Spectacular but unsustainable.
Chief U.S. Economist Ian Shepherdson on U.S. Unemployment
On Thursday morning, we'll get the best-performing indicator of the US labor market: initial jobless claims. For a while now, Pantheon Macroeconomics' Ian Shepherdson has been stressing that the weekly print is noisy, particularly with the volatility the end-of-year season brings
Now that the holidays are just a distant memory, the distortions they cause in an array of economic data are fading. The problems are particularly acute in the weekly data -- mortgage applications, chainstore sales and jobless claims -- because Christmas Day falls on a different day of the week each year.
You may have seen the chart below, which shows what appears to be an alarming divergence between the official jobless claims numbers and the Challenger survey's measure of job cut announcements. We should say at the outset that the chart makes the fundamental mistake of comparing the unadjusted Challenger data with the seasonally adjusted claims data.
We argued in the Monitor yesterday that the very low and declining level of jobless claims is a good indicator that businesses were not much bothered by the slowdown in the pace of economic growth in the first quarter. The numbers also help illustrate another key point when thinking about the current state of the economy and, in particular, the rollover in the oil business.
The headline payroll number each month is the difference between the flow of gross hirings and the flow of gross firings. The JOLTS report provides both numbers, with a lag, but we can track the firing side of the equation via the jobless claims numbers. Claims are volatile week-to-week, thanks to the impossibility of ironing out every seasonal fluctuation in such short-term data, but the underlying trend is an accurate measure. The claims data are based on an actual count of all the people making claims, not a sample survey like most other data. That means you'll never be blindsided by outrageous revisions, turning the story upside-down.
Any model of payrolls based on the usual indicators--jobless claims, ISM hiring, NFIB hiring, and other sundry surveys--right now points to payroll growth at 250K or better. Indeed, the ISM non-manufacturing report on Wednesday is consistent with payroll growth closer to 400K, and the lagged NFIB hiring intentions number points to 300K. Yet the consensus forecast for today's October report is just 182K. Why so timid?
In the wake of the ADP report released Wednesday, we moved up our payroll forecast to 150K from 100K, but we've now taken a closer look at the post-Florence path of jobless claims.
We're expecting to see November payrolls up by about 200K this morning, but our forecast takes into account the likelihood that the initial reading will be revised up. In the five years through 2014, the first estimate of November payrolls was revised up by an average of 73K by the time o f the third estimate. Our forecast for today, therefore, is consistent with our view that the underlying trend in payrolls is 250K-plus. That's the message of the very low level of jobless claims, and the strength of all surveys of hiring, with the exception of the depressed ISM manufacturing employment index. Manufacturing accounts for only 9% of payrolls, though, so this just doesn't matter.
German labour market data continue to break records on a monthly basis. The unemployment rate was unchanged at 6.2% in A pril, with jobless claims falling 16,000, following a revised 2,000 fall in March. March employment rose 1.2% year-over-year, down slightly from 1.3% in February, but the total number of people in jobs rose to a new high of 43.4 million.
The models which generate the ADP measure of private payrolls will benefit in May from the strength of the headline industrial production, business sales and jobless claims numbers.
The underlying trend in payroll growth is running at about 225K-to-250K, perhaps more, and the leading indicators we follow suggest that's a reasonable starting point for our December forecast. The trend in jobless claims is extraordinarily low and stable--the week-to-week volatility is eye-catching, especially over the holidays, but unimportant--and indicators of hiring remain robust. The unusually warm weather in the eastern half of the country between the November and December survey weeks also likely will give payrolls a small nudge upwards, with construction likely the key beneficiary, as in November.
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