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[News] US Q2 GDP Growth Revised up to 3% as Initial Jobless Claims Slightly Declined
Summary:
- Q2 real GDP revised up to 3.0%
- Initial jobless claims last week fell by 2,000 to 231,000
- Continuing claims last week rose by 13,000 to 1,868,000
The U.S. initial jobless claims slightly declined last week, as reported by the Bureau of Labor Statistics on August 29. The Initial claims was 231,000, down by 2,000 from the revised figure of the previous week, outperforming market expectations of 232,000. The four-week moving average was 231,500, down by 4,750 from the previous week’s revised figure. Meanwhile, continuing claims increased by 13,000 to 1,868,000.
At the same time, the Bureau of Economic Analysis also released the second estimate for Q2 Real GDP, revising the annual growth rate up to 3.0%, an increase of 0.2% from the preliminary estimate. The core PCE inflation rate was revised down to 2.8%, a decrease of 0.1% from the preliminary estimate. Overall, the U.S. economy continues to demonstrate resilience, with inflation remaining on a downward trend.
During last week’s Jackson Hole Global Central Bank Symposium, the Federal Chairman Jerome Powell reiterated that the risks of rising inflation are continuing to diminish and that there is sufficient reason to believe inflation will return to 2%.
Meanwhile, the downside risks to the labor market are gradually increasing. Although the unemployment rate remains at a historically low level, it has risen back to 2023 levels. This increase is primarily due to higher labor supply and job vacancies rather than widespread layoffs. However, the Fed do not welcome any further cooling of the labor market.
Finally, Powell clearly stated that the time for policy adjustments has arrived. Although he did not reveal specific plans for rate cuts, insights can be gained from the September release of the Summary of Economic Projections (SEP), where adjustments to the dot plot will indicate the pace and magnitude of future rate cuts by the Fed. Currently, the market expects the Fed to cut rates by 3 to 4 quarter-points throughout 2024 (1 quarter-point in September, 1 to 2 quarter-points in November, and 1 quarter-point in December).
Insights
[News] U.S. Jobless Claims Slightly Increase Last Week, with Continuing Claims Nearing 2021 Highs
The U.S. Department of Labor released the unemployment insurance weekly claims report on August 22. Initial claims for unemployment benefits for the previous week were 232,000, an increase of 4,000 from the revised figure of the prior week. The four-week moving average was 236,000, a decrease of 750 from the revised figure of the previous week. The number of continuing claims for unemployment benefits rose by 4,000 to 1,863,000, nearing the highs last seen in November 2021.
Overall, the upward trend in initial unemployment claims has not yet changed. In the minutes of the July FOMC meeting, Federal Reserve officials clearly indicated that initial claims for unemployment benefits are a key indicator for monitoring the labor market (Regarding the outlook for the labor market, participants discussed various indicators of layoffs, including initial claims for unemployment benefits and measures of job separations.). Therefore, it remains crucial to closely monitor any significant changes in the trend of unemployment claims.
Insights
[News] Strong U.S. Retail Sales and Declining Initial Jobless Claims in July Ease Recession Concerns
The U.S. Census Bureau released retail sales data on August 15. In July, retail sales increased by 2.7% year-over-year, higher than the revised 2% from the previous month. On a month-over-month basis, retail sales rose by 1%, significantly above the revised -0.2% from the previous month and the market expectation of 0.4%. The control group retail sales (excluding auto sales, building materials, gasoline stations, and food services) increased by 0.3% month-over-month, down from the previous month’s 0.9%. The growth was primarily driven by auto sales, which increased by 4% month-over-month, while core retail sales (excluding auto-related sales) and double core retail sales (excluding auto sales and gasoline stations) both increased by 0.4%.
Additionally, the initial jobless claims data was released on the same day. The number of initial claims for unemployment benefits this week was 227,000, lower than the previous week’s 233,000 and the market expectation of 235,000. This marks the second consecutive week of decline in initial jobless claims.
As July’s inflation data continues to normalize, consumer spending remains resilient, and initial jobless claims come in better than expected, the probability of a 25 basis point rate cut has returned to 74% (compared to last week’s peak probability of 85% for a 50 basis point cut). However, the market is still awaiting the release of the non-farm payroll data and the unemployment rate, which are currently the Federal Reserve’s top concerns, before expectations for a rate cut in September may be adjusted.
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