Jobless claims, trade gap and inventories paint mixed economic picture
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Thursday's economic data provided assurances that the labor market and private inventory growth are supportive of economic growth, while a deepening trade deficit offers a minority report to the contrary.
Last week, 203,000 U.S. workers joined the line outside the unemployment office USJOB=ECI, or 4,000 fewer than the previous week and 5,000 fewer than economists were expecting.
Ironing out weekly volatility, the four-week moving average continues to drift sideways near half-century lows.
Fresh claims have been bouncing around the low 200,000s for months. And while low jobless claims are usually a sign of a strong labor market, the surprise job losses in July's employment report, the weakening labor force participation rate, and the drop in job openings in the most recent JOLTS report all support the notion that the labor market remains in low-hire/low-fire mode amid ongoing economic and geopolitical uncertainties.
"The jobless claims data continue to be consistent with our view that the labor market is broadly in balance, with both the demand and supply of workers relatively soft, while layoffs remain low," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
Ongoing jobless claims USJOBN=ECI, reported on a one-week lag, dipped 1.0% to 1.778 million, falling 12,000 short of consensus.
Continuing claims are at long last drifting back to the pre-pandemic norm, a fact that appears to agree with the recent uptick in job confidence. But that gauge (the Conference Board's "jobs plentiful" minus its "jobs hard to find" components) remains low by historical standards, so perhaps the decline is at least partly attributable to benefits expiration and the falling labor force participation rate.
Next, the Commerce Department released its advance take on the goods trade balance USGBAL=ECI and wholesale inventories USAWIN=ECI for July.
The gap between the value of goods imported into the United States and those exported yawned 17.1% wider to $118.8 billion last month.
That's $18.3 billion wider than analysts expected.
In detail, exports fell by 2.9%, with industrial supplies and food/feed/beverages and capital goods falling 11.2% and 1.4%, respectively.
Imports, a GDP detractor, rose by 3.7%, led by an 11.3% increase in capital goods.
Net trade has been a drag on GDP in all but two of the last 10 quarters. In the Commerce Department's most recent take on second-quarter GDP, net trade detracted 1.1 percentage points from the headline figure.
"Trade (will) still reduce headline growth by more than one percentage point in Q3 overall even if the goods deficit roughly snaps back to June’s level over the rest of the quarter," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.
Note: trendline gaps are the result of last fall's government shutdown.
In cheerier news, the value of goods stacked in the warehouses of U.S. wholesalers rose by 1.3% last month, an acceleration from the prior month's 0.3% gain.
"That drag from net trade ought to be partly offset, at least, by a positive contribution from private inventories, with the sizeable increases in both nominal wholesale and retail sectors in July looking more impressive after considering the valuation drag from the 0.7% fall in PPI prices for goods last month," Allen adds.
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