3 Numbers: US jobless claims on track for modest decline
- Economists project jobless claims will tick lower in today’s weekly update
- Bloomberg’s weekly consumer comfort index likely to hold steady
- Has the benchmark 10-year Treasury yield found a floor this week at the 1.7% range?
US: Initial Jobless Claims (1330 GMT) Fed Chair Janet Yellen yesterday said that global risks could create trouble for the US this year, but she predicted that the economic recovery would survive. “Ongoing employment gains and faster wage growth should support the growth of real incomes and therefore consumer spending,” she said in a testimony to Congress on Wednesday. (A follow-up performance by Yellen is scheduled today for the Senate at 1500 GMT.)
Today’s weekly update on jobless claims will offer some fresh perspective on evaluating the Fed chair's forecast. Recent updates for this leading indicator look a bit worrisome, however. Note the upward trend in the chart below over the last two months. The increase in new filings for unemployment benefits is still modest and so it’s debatable if the recent numbers are a genuine signal that a bearish reversal is under way.
One more reason to reserve judgement: economists think that today’s update will reflect a modest decline of 4,000 to a seasonally adjusted 281,000. If so, claims will remain near the low end of the upward sloping channel of late, which will provide some comfort for arguing that the recent increase in claims is noise.
Another reason for cautious optimism: Tuesday’s update of first-quarter economic activity via the Atlanta Fed’s GDPNow model, which now pegs GDP growth at 2.5% – an encouraging rebound from Q4’s tepid 0.7% rise.
If analysts are right about today’s release, the claims data will offer another clue for thinking that the recent run of softer figures isn’t a death knell for the US recovery.
Today’s update from Bloomberg will offer some advance insight on the mood in early February. Recent updates suggest that we’ll see a message that matches the narrative in the monthly data. The weekly Consumer Comfort Index eased to 44.2 in January’s final week, but that’s in line with the values published so far this year.
Gallup’s survey updates in recent weeks paint a similar profile. The firm’s US Economic Confidence Index was unchanged in the first week of February. “Americans' evaluations of the economy are unchanged from last week and from most weeks so far this year,” Gallup advised earlier this week.
Given what we already know about the consumer sentiment, it would be surprising if today’s update from Bloomberg reveals a sharp break vs. recent data. Given the current climate, no news will be good news.
Yellen and company may be inclined to keep their options open and remain non-committal, but the Fed funds futures market continues to price in a near-zero chance of a rate hike at next month’s FOMC meeting, based on yesterday’s CME data.
By some accounts, however, it’s still game-on for policy tightening. “She is holding to her guns,” opined the chief financial economist at Jefferies via Bloomberg. “The financial market turmoil is not going to make them reverse course. It could have an effect on the pace at which they normalise rates, but they are still committed to normalising rates.”
Perhaps, although it’s hard to make that case from the vantage of Treasury yields, which have fallen sharply so far this year. There is, however, signs of stability emerging. For the moment, the benchmark 10-year yield’s slide has hit a floor at roughly the 1.7% level.
What might trigger a new decline? Weak economic data, of course. Today’s weekly jobless claims is on the shortlist of catalysts, for good or ill, along with tomorrow’s monthly update on retail sales for January. But for the moment, an anxious calm has returned to the 10-year note.
– Edited by Gayle Bryant