Jobless Claims Drop, Q1 GDP Jumps
Wednesday, June 28th, 2023
The final days of calendar Q2 and the first half of 2023 are accumulating some insightful economic and earnings data. This is generally a quiet time for market movers; perhaps because of this, the morsels of economic information we’re now getting are being combed through rather finely. And pre-market futures have responded favorably, if moderately.
Initial Jobless Claims dropped unexpectedly down to levels we haven’t seen in a month: 239K new claims were filed last week, down from the 260K+ posted in each of the last three weeks. Expectations had been for 265K — the same as the upwardly revised previous week’s initial claims tally. Continuing Claims also surprised to the downside — 1.742 million longer-term jobless claims are the lowest of this past 12-week cycle.
What had already spoke to a comfortably resilient labor market over the past several months — when experts everywhere were looking for signs of meltdown in the domestic workforce — now takes a decided step toward a more robust employment situation. Even when new claims had been blossoming in recent weeks, longer-term claims stayed historically low, which indicated many of those newly unemployed were being re-employed at an impressively fast rate. It does not appear as if the labor train is slowing down.
The 2nd Revision to Q1 Gross Domestic Product (GDP) shot up much higher than anticipated, especially for such a mature number: +2.0% is 70 basis points (bps) higher than the previous print, and notably beyond the +1.6% analysts were expecting. This is still lower than Q4’s final +2.6%, but if it had been suggested last Christmas that halfway through the year there’d be no recession and 2% growth in Q1, we’d have all signed up for it right then.
Personal Consumption numbers (the full PCE report comes out Friday morning) came in at +4.2% for May, above the +3.8% expected, while the Pricing Index reached +4.1%, a tick down from the +4.2% expected and reported the previous month. Core PCE quarter over quarter was +4.9%, down a smidge from estimates. A more full report is due out a day from now, but if these numbers are a clear indication, we appear to be shifting between gains and narrow losses.
These reports may not be what the Fed wants to see as it looks for a way to put a bow on interest rate hikes at future meetings, but they do illustrate a domestic economy that continues to fight through headwinds — and with improvements on the horizon, from dwindling inflation to more global economic activity. Remember, the one sure way to see the Fed cut interest rates would be to see something important “break” in the economy. That we haven’t seen it to this point is nothing to weep over, even if it means higher interest rates for longer.
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