Thursday, April 6th, 2023
The parade of weak economic data continues this morning — in fact, it looks to have accelerated. Weekly Jobless Claims not only surged above 200K in the new claims side, which is something analysts had been scratching their heads waiting for, but seasonal adjustments going back over the past 12-week cycle or more now show we’ve been above 200K for the past eight weeks.
The headline number on Initial Jobless Claims registered at 228K for last week, above the 200K analysts were estimating (based on the non-seasonally adjusted levels), which had been the first time we’d seen a headline number above 200K since the first week of March. It turns out we’ve actually come down in claims from 246K the previous week, which originally was reported as 198K. In fact, we now see this is the lowest level of new jobless claims in the entire month of March.
Continuing Claims show a similar revision above a psychologically pleasing level, in this case 1.7 million longer-term jobless claims — we blew past it two weeks ago (Continuing Claims report a week in arrears from Initial Claims) to 1.823 million, up from the previous week’s upwardly revised 1.817 million. Previously, this longer-term claims figure had been reported at 1.69 million. Today’s number was thought to have been the highest tally since December of 2021.
OK, so now we’re more clearly aligned with the rest of the labor market data we’ve seen of late. These weekly claims numbers were the last bastion of robust employment we’d seen, and now these revisions blow them out of the water. In one way, this is good news: it’s crystal clear that high interest rate levels have shrunk inflation metrics — labor being the laggard indicator. We’re now here: the “pain” the Fed told us it would be inflicting on the economy.
With this newly found trajectory of jobless claims data, we now look toward downward trajectories in other aspects of the economy, and we have no shortage of these, even in this very week: S&P and ISM Manufacturing and Services PMI, Construction Spending, JOLTS, Factory Orders, ADP private-sector payrolls — all lower than expected. Weekly jobless claims almost feels like the other shoe dropping.
And it don’t stop: next week brings us CPI and PPI data, Retail Sales, Industrial Production and Capacity Utilization, plus new weekly jobless claims totals. Should this train of lower economic prints add more cars next week, we would be hard pressed to believe the Fed will continue raising interest rates at its next meeting on May 2nd and 3rd. And this, my friends, is where this train of “good news is bad news” and “bad news is good news” finally pulls into the station.
Tomorrow morning we get the all-important Employment Situation report from the U.S. government — and there is a key notice here: Zacks’ offices will be closed in observance of Good Friday, so our report on these figures will have to wait until Monday. The past three reads on this data have been all over the place: 239K in December, 504K in January, 311K in February. Estimates are for 238K, about the same as we saw in the final month of last year. But with other metrics taking out lows, we advise toward a downward bias on tomorrow’s report — perhaps a significant one.
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