Pre-Markets Sag Again, Jobless Claims Remain Light
Pre-market futures are down yet again, following something of a multi-year pattern of near-term highs coming right around Labor Day, and taking a quick detour south from there. In 2020, we took a pause right after the start of September, then resumed that year’s market climb. In 2021, we saw a short dip for the first month or so of the school year, then ripped higher through the end of the year. Last year saw the initial Labor Day drop and after that free-fell to yearly lows.
What does any of this spell for 2023? Currently we remain off mid-August lows after a strong week with Goldilocks jobs numbers and a somewhat muted outlook on interest rates from Fed Chair Jay Powell. But this latest downturn seems to be pricing-in something else. Is it removing the idea that 100+ basis points (bps) of the Fed funds rate will be coming off in 2024? (And if it isn’t, shouldn’t it be?)
We’re a slow boat on the ocean this week, without a ton of data to draw from in terms of economic reports or earnings results, at least compared to a week ago. That said, we did get a final look at Q2 Productivity, which came in at +3.5% from the +3.7% prior print. Unit Labor Costs at +2.0% follows +1.6% at out last look. Taken together, these illustrate a minor tick-up in labor market outlays and a slightly more significant dip in productivity. These types of data points do better with a longer view: Productivity came in smack-dab in the middle of our 12-quarter cycle, while Unit Labor Costs are at all-time highs, though basically at a plateau we’ve had for the past year or so.
Initial Jobless Claims continue to impress/confound economic analysts: 216K new claims last week was well off the 230K expected, the slightly upwardly revised 229K the previous week, and the lowest single-week for initial claims since February. Perhaps the anomaly here is a higher number of Baby Boomers retiring than ever before, and perhaps a good segment of the newly laid-off population are finding jobs right away at other firms rather than applying for jobless claims. But either way, these figures continue to demonstrate labor market strength.
Continuing Claims came in at 1.679 million, down from a downwardly revised 1.719 million the previous week. This matches the lows for the 12-week cycle, and is the fifth sub-1.7 million print in the past seven weeks. We haven’t touched 1.8 million since May, and considering Continuing Claims are posted one week behind Initial Claims, it may be expected we stay at these historically low levels for at least another week. In any case, this is more strong data for American labor, and is consistent with results we saw from monthly jobs reports last week.
So are we setting up to rip higher, looking for another leg down, or flattening out? Impossible to tell from this vista, although reasons to point to a market plummet are dwindling along with predictions the economy will suffer a hard landing. In short, we have more reasons to be positive than negative, even with near-term markets on the wane. Perhaps it’s time to bring out one’s wish-list for new buys again?
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