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New Jobless Claims Up to 200K, Q1 Productivity -7.5%

·3 min read

Thursday, May 5, 2022

Markets feel a little hungover from yesterday’s post-Fed meeting party, where indices zoomed ahead on word that the Fed continues to take inflation seriously but is not willing to crush the economy to eradicate it. Specifically, a 75 basis-point (bps) hike in the next few months is not actively being debated. Markets had been selling off in the days and weeks ahead of this meeting, then popped the cork yesterday afternoon.

Initial Jobless Claims for last week jumped to 200K — breaching a 2-handle for the first time since before Valentine’s Day, up +19K from the previous week’s upwardly revised 181K. Still 200K new claims is still indicative of a healthy labor market, which we’ve seen in recent monthly jobs data and may see again tomorrow morning with the big nonfarm payroll numbers from the U.S. government.

Continuing Claims, from a week in arrears of new claims, managed to reach a new post-Covid low to 1.384 million from the previous week’s downwardly revised 1.40 million. We remain at 52-year lows on long-term unemployment claims, and back in 1970 our economy was vastly different than it is today. Perhaps this release will mark a cycle low as new claims seem to be inching upward, but we’ll let the data tell the story.

The preliminary read (subject to future revision) on Q1 Productivity came in notably worse than expected: -7.5% was lower than the -5.2% anticipated, and a big reversal from the previous quarter’s +6.6%. Meanwhile, Unit Labor Costs cranked up notably higher than estimates: +11.6% from +10.5% expected, and from +0.9% reported the previous quarter.

The headwinds from Q1 2022 are well documented, and this productivity metric gives us a look in our rearview mirror of a quarter first set back by the rise of the Omicron variant in the U.S. and elsewhere, then further challenged by Russia’s invasion of Ukraine and the West’s sacrifice in oil & gas supplies. Yet employers hired staff — and paid higher wages — as if the economy was still going full-bore.

ConocoPhillips COP beat estimates on both top and bottom lines in its Q1 earnings report this morning: earnings of $3.27 per share outpaced the Zacks consensus by 3 cents, while revenues of $19.29 billion beat estimates by +17.3% in the quarter. This marks six straight earnings beats for the Integrated Oil & Gas giant, which is already +43.9% year to date and another +1.6% in today’s pre-market. For more on COP’s earnings, click here.

Royal Caribbean RCL posted mixed results in its Q1 report this morning: -$4.58 per share actually beat the Zacks consensus by a dime, although $1.06 billion on the company’s top line was slightly below the $1.11 billion our analysts were anticipating. The sea cruise sub-sector of the Travel & Leisure industry has been particularly sensitive to Covid infection rates, and these results reflect this. Shares are -1.2% in the pre-market, -5% year to date.
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