Healthy Jobless Claims Fail To Spur On Stock Market
Though jobless claims moved higher last week at a slightly faster pace than expected, the overall trend is still very encouraging and suggestive of a tightening labor market.
Thursday, May 21, 2015 - 00:00
Though jobless claims moved higher last week at a slightly faster pace than expected, the overall trend is still very encouraging and suggestive of a tightening labor market. Initial jobless claims rose 10,000 last week to 274,000, after three consecutive weeks below 270,000. The upshot is that the four-week moving average improves for a fourth successive week, falling 5500 to 266,250, the best level seen since 2000, and over 20,000 better than it was looking a month ago. We haven’t been seeing strong job creation in the monthly employment reports so far this year, but there is enough evidence here to suggest strong improvement in the labor market.
Despite advances in the jobs market and surging numbers for housing starts earlier this week, the general picture for April is one of disappointment, with the hoped-for spring bounce largely failing to materialise. This was underlined by today’s release of the Chicago Fed’s National Activity Index for April, which came in at a lowly reading of -0.15, below the consensus estimate and suggestive of below-trend growth. Employment was a highlight of the report, as we might expect, but production and personal consumption were both areas of weakness.
Yesterday’s release of the minutes from the April FOMC meeting clarified what had been widely-suspected: that the Fed is not considering June as a likely time for hiking rates. Though the softness in the economy in the first quarter has been impossible to miss, the Fed statement that came out of the April FOMC meeting was a little ambiguous, with forward guidance pretty much stripped to a bare minimum, devoid of any calendar references in contrast to the previous few statements. The minutes, therefore, were quite illuminating, revealing as they did that only ‘a few anticipated that the information that would accrue by the time of the June meeting would likely indicate sufficient improvement in the economic outlook’ for policy firming, while ‘many participants’ thought it unlikely. The minutes didn’t go so far as to rule out June as a possible time for lift-off, but it’s clear where the chips lie on the table.
Despite these encouraging signs from a stock-market perspective — a healthy jobs market alongisde dovish indications from the Fed —stock prices have eased in early trading on Wall Street. Shortly after the open in New York, the Dow Jones was down 23 points or 0.13% at 18,262, while the S&P 500 Index was little-changed at 2125.6, representing a drop of just 0.01%. In the FX market, the pound enjoyed steep gains after the release of very strong UK retail sales data for April. Though March sales were revised down from the originally-reported -0.5% to -0.7%, there was an impressive rebound of 1.2% in April, far exceeding expectations for a 0.4% gain. This is the best level seen since November 2014, and year-over-year retail sales were 4.7% higher. The report suggests UK consumers are ready and willing to spend, a very positive sign for economic growth. GBP/USD rose 0.76% to 1.5655.
Oil prices continues to rebound, buoyed by geopolitical tensions and evidence that the oil glut may be easing. The US Energy Department yesterday reported a third straight week of declines in oil inventories, while Iraqi forces are battling ISIS militants to the east of Ramadi, the Iraqi city taken by ISIS earlier in the week. Though the conflict has yet to impact on Iraqi exports of oil, worries have naturally taken root about what the future may hold for supplies from the region. US crude oil futures rose 1.5% to just under $60 a barrel, while Brent crude futures also rose more than 1%.
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