Initial jobless claims totaled 244k, 4k more than expected and up by 10k w/o/w. As a 261k print drops out, the 4 week average falls to 243k from 247k and that is the lowest since last month. Continuing claims, delayed by a week, fell by 49k, that’s down for a 3rd straight week and to the lowest level since April 2000.
Bottom line is the same ole bottom line in terms of the still modest pace of firing’s due to the dearth of qualified employees available and on hopes for quicker economic growth due to tax reform. I do want to add something that while the pace of firing’s remains very low historically, when it gets this low it’s typically in the latter stage of an economic cycle as to be expected. Labor markets after all are lagging indicators. Here is a chart of the 4 week average going back to 1970. We see a bottom in February ’06, one in April 2000, one in January 1989 and in early 1973. Recessions started soon after. I’m not calling for one anytime soon but just saying:
The April Philly manufacturing index fell 11 pts to 22 and that was 3.5 pts below the forecast. This index has gone from 8.7 in November to 43.3 in February and is now back below its 6 month average as confidence falls closer to reality. New orders fell 11.2 pts to 27.4 but remains well above the 15.2 print in November. Backlogs dropped to 6.6 from 14.4 and that’s the lowest since December and compares with 3.3 in November and -.7 in October. There was some inventory build as this component was higher by 6 pts to the most since 1981 (end demand better support this). Employment was a bright spot, as it was in the NY survey, as it rose 2.4 pts to 19.9, the best since 2011. The average workweek was up a touch. Price pressures got some relief as prices paid fell 7 pts after spiking by 10.6 pts last month. Prices received fell by 4 pts after jumping by 10 pts last month. The upward move in commodity prices has certainly stopped for now and that was reflected here but prices are still near 2 yr highs.
Looking forward, the 6 month Business Activity outlook fell 14 pts to the lowest since November and is now 11 pts below the recent peak seen in January. Capital spending plans rose 2 pts and that is an encouraging aspect of the report as it’s the best in years. The Philly Fed said “Expected high sales growth and the need to replace capital goods were the most cited reasons for the increase.” I say about time.
Bottom line, as also seen in the NY survey a few days ago, sentiment is falling back to some reality and that reality is still a slow growth economy. How else can I explain a 1.6% growth rate last year and maybe a .5% pace in Q1. We should get a rebound in Q2 but I’m really questioning anything sharp. And, the impact of a faltering auto sector is a big deal for an area of the economy that was so influential in the post recession recovery.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.