Jobless Claims Tick Up as U.S. Labour Market Remains Tight
The U.S. labour market is still signalling progress even with an increase in filings for unemployment benefits last week, Labour Department figures showed Thursday.
HIGHLIGHTS OF JOBLESS CLAIMS (WEEK ENDED JUNE 24)
- Jobless claims rose by 2k to 244k (forecast was 240k); remain near 227k level in February, lowest since 1973
- Continuing claims were up by 6k to 1.948m in week ended June 17 (data reported with one-week lag)
- Four-week average of initial claims, a less-volatile measure than the weekly figure, decreased to 242,250 from 245,000 in prior week
A shortage of qualified workers is making employers reluctant to let go of the people they already have, keeping the underlying trend in jobless claims near the lowest level in more than four decades. While weekly data can be volatile, other recent reports such as monthly hiring and job openings show demand for labour remains solid. That’s among reasons why consumer spending and economic growth are projected to rebound this quarter after a relatively weak start to the year.
U.S. First-Quarter Growth Revised Up to 1.4% on Consumption
The U.S. economy’s first-quarter growth was less tepid than previously reported, as consumer spending and trade added more to expansion, Commerce Department data showed Thursday.
HIGHLIGHTS OF FIRST-QUARTER GDP (THIRD ESTIMATE)
- Gross domestic product rose at 1.4% annualized rate (forecast and previous estimate were 1.2%)
- Consumer spending, biggest part of the economy, rose 1.1% (forecast and previous estimate were 0.6%)
- Exports grew 7%, revised from 5.8%
While the revision was more positive than most analysts anticipated, the report still underlines a relatively weak start to the year, with consumer spending growing at the slowest pace since 2013. Weather and other temporary factors in the period, along with rising wages and salaries, support the idea of a consumer-led rebound in the second quarter. Federal Reserve policy makers raised interest rates earlier this month, seeing the first-quarter slowdown as transitory as the labour market improves further. The Commerce Department attributed the latest upward revision to spending data for financial services, insurance and health care. Exports of industrial supplies and materials were higher than previously reported, boosting trade’s contribution to expansion in the period.
End of easy money? Surging euro, bond yields say yes
The euro surged to its highest in over a year on Thursday, while sterling, bond yields and global shares also climbed, as a slew of hawkish comments from central banks signaled the era of easy money might be coming to an end not only in the United States. The dollar touched its lowest since October – before Donald Trump was elected U.S. president – against its broad index, as investors shifted to the view that the U.S. Federal Reserve might not be the only game in town when it comes to higher interest rates. With the Fed’s clearing of all banks in the second part of its stress tests, financials led global stocks to record highs. Worries over the impact of tighter monetary conditions on share prices were offset by confidence in robust global growth as central banks move toward normalization. Wall Street was to open higher again after the S&P 500 scored its biggest one-day percentage gain in two months in the previous session. As euro zone bond yields rallied, the euro surged to as high as $1.1435, its strongest since May 2016. “If all central banks sound hawkish at the same time then divergence, and therefore FX volatility, will stay low,” Deutsche Bank currency strategist George Saravelos wrote in a note to clients.
China factory activity seen cooling in June, crackdown on debt risks drag
Factory activity in China is expected to have cooled slightly in June from the previous month, a Reuters poll showed, as manufacturers are pressured by government efforts to reduce high levels of debt across the world’s second-biggest economy. Most analysts agree that Beijing’s crackdown on debt risks and tightening financial conditions will slow China’s momentum after a strong start to the year when first quarter growth came in at 6.9 percent. Corporates are already facing higher financing costs, which could ripple through to decisions on investment, hiring, and wages over the next year. Moreover, a raft of property curbs have effectively cooled sales in the biggest cities and started dragging on property investment. Indeed, investment growth in the real estate sector slowed for the first time in three months in May. That could hurt the construction sector – a big boon for the economy in the past few quarters. “We believe that deleveraging has continued in June and it had some cooling impact on the economy,” said Kelvin Lau, senior economist for Greater China at Standard Chartered.