Labor Market Improves as Jobless Claims Decline in the US
US Consumer Confidence Is Up, Even Though Retail Sales Are Down (Part 1 of 3)
Key indicator readings on March 12
March 12 saw two key indicator releases in the US: the initial jobless claims data for the week ended March 7 and the retail sales report for the month of February. On the European side, negative inflation figures came out for France, Ireland, and Spain.
Let’s begin with the US.
Jobless claims
The US Department of Labor’s Employment and Training Administration comes out with its weekly report on the number of individuals who have filed for unemployment insurance for the first time. The jobless claims report serves as a good indicator for labor market conditions in the US. An increase in jobless claims indicates increasing unemployment, and thus, deteriorating labor conditions. A decrease in jobless claims bodes well for the labor market, and therefore, the general well-being of the economy.
For the week ended March 7, there were about 289,000 new claims for unemployment insurance. The report came in below the median estimate of about 305,000 claims, and was also down from the previous week’s 325,000 claims.
A declining trend in the jobless claims indicates improvement in the labor market conditions, which also boosts consumer spending, as average household income increases. Retail sales figures, which are a more direct indicator of an increase or decrease in consumer spending, also came in on March 12.
Retail sales
The monthly retail sales report from the US Department of Commerce’s Bureau of the Census, is one of the most closely watched reports by investors in the Consumer Discretionary Select Sector SPDR ETF (XLY) and the SPDR S&P Retail ETF (XRT). While retailers such as PetSmart (PETM), Urban Outfitters (URBN), and Coach (COH) are subject to seasonality in demand, long-term investors look at the broader picture. The good news is that the returns for investors in these ETFs haven’t been as seasonal as retail sales.
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