Falling Jobless Claims and Stronger Indicators Drive EXPE Up 6.71%
Rising Grexit Concerns Weigh Down European Equities
Technology supports low jobless claims
Historically, people have viewed technology as detrimental to job growth. As companies become more capital-intensive, they become less labor-intensive. However, when the technology sector becomes the key driver of economic growth, it leads to job creation. Growth in the technology sector and technology-enabled retail companies such as Expedia (EXPE), Salesforce.com (CRM), and Intuit (INTU)—which have gained 32.38%, 26.47%, and 15.80% year-to-date, respectively—contributed to job gains in the US economy. EXPE was up 6.71%, CRM gained 2.88%, and INTU recorded a 2.50% rise on May 22’s close.
Jobless claims have been declining in the United States
Consequently, jobless claims (claims for unemployment insurance) have been declining in the United States (SPY)(IVV). For the week ended May 16, 2015, the four-week moving average level of jobless claims was down to 266,250 from 271,750 in the previous week, according to a US Department of Labor report released on Thursday, May 21. Though the weekly figure rose from the 264,000 recorded for the week ended May 9 to 274,000 in the week ended May 16, continuing claims kept showing strength in the labor market. Continuing claims were down by 12,000 for the week of May 16.
Declining jobless claims indicate increased household income. This generally translates to an increase in consumer spending. It bodes well for retailers and the consumer sector in general. The Consumer Discretionary Select Sector SPDR ETF (XLY), which tracks the consumer sector, has been rising with declining jobless claims.
Leading indicators strengthened in the United States
The Conference Board’s Leading Economic Index (or LEI) for the United States, issued monthly, is a composite index of economic indicators that lead overall economic activity. The LEI is based on ten different economic statistics: average workweek, initial jobless claims, ISM new orders, manufacturers’ new orders, building permits, stock prices, leading credit index, interest rate spread, and consumer expectations.
The LEI was revised upward to 0.7% in April. Positives in the report included a jump in building permits, the yield spread, which reflects the Fed’s zero lower bound key interest rate policy, and the leading credit index, which points to healthier borrowing conditions and a rise in lending.
There was also some positive indicator news from the Eurozone, which managed to emerge from deflation. However, stocks and Europe-tracking ETFs were down. Let’s find out why in the next part of this series.
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