Claims drop, Philly mfr’g does too

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United States

Initial jobless claims fell 15k w/o/w to 233k and that was 12k below the estimate. This lowered the 4 week average to 244k from 246k. Continuing claims, delayed by a week, rose by 28k to the highest level in 3 months (not sure what to make of that just yet). Bottom line again is that the level of firing’s remains very modest in the midst of a labor market where the supply is shrinking to low levels. This remains the tinder for faster aggregate wage growth if somehow productivity can improve.

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The Philly manufacturing index for July fell to 19.5 from 27.6 and that was 3.5 pts below expectations. This follows the miss in the NY survey. The internals however were more soft than the headline figure. New orders fell to just 2.1 from 25.9 and is now well below the 6 month average of 26.2. That is the weakest since August when it printed -3.4. Backlogs fell 7 pts to 7.2 after rising by 5 pts last month. Shipments are at the lowest level since September. Inventories went from 5.8 to .7. The employment components also weakened. Employment dropped by 5.2 pts to 10.9, the lowest since December and the Workweek dropped by 16.7 pts to just 3.8, the weakest since November. Positively, the business activity 6 month outlook did improve by 5.6 pts to 36.9, a 3 month high but this touched 59.5 back in March. Both prices paid and received softened from June back to levels seen late last year.

Bottom line, after a 1.6% 2016 US GDP growth rate, followed by 1.4% in Q1 and likely something around 2% in Q2, at least seen with the NY and Philly manufacturing surveys, Q3 has started off in a very modest way. The headline Philly number masked particular weakness in the internals where some of the key components such as new orders has given back all of the post election gains.

NEW ORDERS