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Real Time Insight

Initial unemployment claims continue to show healthy labor market conditions. Claims fell 15,000 to 320,000 in the week ending August 10th.  The 4-week average eased 4,000 to 332,000.  A year ago, the 4-week average was 366,000.   Initial claims are at a post Great Recession low.

Continuing claims were down 54,000 to 2,969,000, bringing the 4-week average to 2,986,500.  A year ago, the 4-week average was 3,302,250. 

The headline August Empire Survey fell to 8.24 from 9.46 in July.  The number was slightly less than the 10.0 forecast.  However, employment numbers in the survey displayed improvement.  The number of employees rose to 10.84 from 3.26, while the workweek increased to 4.82 from -7.61.

The labor numbers were stronger than business activity where new orders slipped to 0.27 from 3.77 and shipments relaxed to 1.47 from 8.96.  Unfilled orders and delivery times showed contraction at -6.02 and -1.20 respectively.

This morning’s labor market indicators run against the profit guidance provided by a few high profile retailers.  Yesterday, Macy’s (M - Analyst Report) guided its profit outlook for the second half lower.  Likewise, this morning Kohl’s(KSS - Analyst Report) and Wal-Mart (WMT - Analyst Report) cut their profit guidance.  KSS projected Q3 EPS at $0.83 to $0.92 compared to a Zacks Consensus Estimate of $0.94, while WMT saw Q3 EPS at $1.11 to $1.16 against a Zacks Consensus Estimate of $1.17.

Today’s labor data also contrasts last night’s layoff announcement from Cisco (CSCO - Analyst Report).

RTI Question:  Are signs of a firm labor market in this morning’s data enough to offset weak earnings guidance in the retail sector and keep stock prices moving higher?


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