Claims still low/ Philly mfr’g headline deceiving

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United States

Initial jobless claims totaled 232k, 8k less than expected and down 4k from last week. The 4 week average fell to 241k from 244k and that is just above the lowest level since 1973. Continuing claims, delayed by a week, fell by 22k to match the lowest level since also 1973. The bottom line is the same bottom line I’ve been talking about for a while. Employers are holding on tight to their employees because the labor market is running out of qualified available workers.

After a negative print in the NY manufacturing index a few days ago, the May Philly manufacturing index did the complete opposite. Its index rose almost 17 pts to 38.8 which was well above the forecast of 18.5. This number has been extremely volatile month to month. It printed 8.7 in November, 19.7 in December, got as high as 43.3 in February, and fell to 22 in March. The internals though were MUCH more mixed. New orders fell 3 pts to the lowest since December while backlogs were up a modest 2.4 pts to 9.0 after falling by almost 8 pts in April. Inventories plunged by 16.4 pts. Shipments spiked by almost 16 pts but that’s backward looking. The employment component was down by 2.6 pts while the Workweek was up 3 pts. Prices paid fell 9.5 pts to the lowest since October and prices received was down by 1.3 pts to the weakest since December.

Also not correlating to the headline number, the 6 month outlook fell 10.6 pts to 34.8, the lowest since November. The 6 month outlook for new orders, shipments, backlogs, inventories, employment and workweek all fell m/o/m. Also, capital spending plans fell 3.9 pts but is still above its 6 month average.

Bottom line, the headline index did not reflect the moderation in most of the key internals, including the 6 month view point, as the headline is not a sum of its parts. Thus, don’t get too excited here on the headline print.