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Q1 GDP Stays 3.1%, Jobless Claims Climb to 227K

Mark Vickery
While Q1 GDP stayed at a strong number, jobless claims seem to be creeping in the wrong direction.

Thursday, June 27, 2019

The final look at Q1 GDP is 3.1%. This remains a very good number. Because it is a lagging indicator (at this point), we don’t see things like the prolonged U.S.-China trade war showing up much in the data — in fact, it could be argued that positive aspects of Q1 GDP amounted to squirreling away assets ahead of the down times economically that the trade war brought about.

What the Fed — you know, that governing body that decides interest rates — pays closer attention to is the Personal Consumption Expenditures (PCE), which came in lighter than expected at +0.9%. Consensus had this at +1.3%. But “core” PCE — stripping out volatile commodity costs — came in at +1.2%, close to in-line.

Initial Jobless Claims stepped out of its long-term (and extremely strong) 200-225K range, posting 227K new claims last week. This follows the 216K reported a week ago. It seems the sub-200K days may be behind us, but anything under 250K can still be viewed as positive for the domestic workforce. Also, let’s not jump at a single data point as evidence of anything — first we must establish a higher weekly claims rate overall before deciding the peak of U.S. employment has passed.

Continuing Claims were also higher — 1.688 million versus 1.665 million last time — but still in-line with historical awesomeness. Not until these numbers begin approaching 2 million on a given week should we be concerned about the long-term unemployed.

In other news, an additional problem has emerged ahead of the re-launch of Boeing’s BA 737 MAX: in a simulator test, its runway stabilizer malfunctioned. Analysts have discussed the need to replace the plane’s microprocessor, which would further delay the plane’s certification. Not welcome news for what investors had been hoping would be a clean return to Boeing’s revenue stream.

President Trump arrived in Osaka, Japan this morning, ahead of the G-20 summit. The meeting of the top 20 economies in the world is taking a back seat, however, to the prospect of Trump and China’s President Xi Jinping holding a private meeting Saturday. There are hopes the trade war between the U.S. and China may get back on track — if not to an actual deal, at least a temporary truce being arrived at.

Mark Vickery
Senior Editor

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