Jobless Claims Stay Elevated

This morning’s weak Jobless Claims data provides another reminder of the labor market’s recent loss of momentum. Growth worries come through from headlines about China as well, with a private sector reading confirming the weakening trend in that country’s manufacturing sector. The Fed acknowledged these growth concerns on Wednesday, when it significantly downgraded its GDP growth outlook.

Initial Jobless Claims dropped by 2K to 387K last week. But since the preceding week’s tally of 386K was revised upwards by 3K, we actually have a modest decrease. The four-week average, which smoothes out the week-to-week volatility, increased by 3.5K to 386.8K.

This week’s Jobless Claims data pertains to the survey week for the June non-farm payroll numbers that will come out early July. And these numbers confirm that the June jobs will be along the lines of what we have been seeing in the last three months.

Europe as a problem has been with us for a while now, but this synchronized global slowdown appears to be becoming an even bigger issue. We are not seeing this issue play out fully in the equity markets yet, but the oil market seems to be appropriately pricing it. Stock market investors appear to be holding out hope that central banks would be able to stem the slide. The Chinese have started implementing some stimulative measures and this morning’s HSBC ‘flash’ PMI results show that they will need to do more.

On the home front, one could argue about whether the Fed’s various easing measures have had any impact. But no one can doubt that they stand ready to ‘do more’ going forward. Wednesday’s extension of Operation Twist was considered underwhelming by some in the market, but the bigger news was the extent of the downgrade to the Fed’s GDP growth outlook.

Bernanke went to great lengths in his press conference to reiterate that they are not out of options and that they will do more should there be a need. But the market seems to realize that the Fed may not be able to do anything else this year, given the November elections and the timeline for Operation Twist 2.

In corporate news, ConAgra Foods ( CAG - Analyst Report ) came out with better-than-expected results when one-off pension accounting related charges are excluded. Rite Aid ( RAD - Analyst Report ) posted better-than-expected results, but guided lower. CarMax ( KMX - Analyst Report ) missed expectations.