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Initial Claims Come in Lower

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Important economic data has hit the tape this morning, none of which is likely to impress the Fed, which has already started to take its foot off the gas of higher interest rate hikes. Pre-market futures have taken the news pretty much in stride, but they were down anyway, save the Dow. The blue chip index is +50 points at this hour, while the S&P 500 is -20. The tech-heavy Nasdaq has shed -100 points in early trading this morning.

Initial Jobless Claims lowered again week over week, to 190K from an unrevised 192K the previous week. Expectations had been for new claims to raise to 195-197K, but the labor market proves puzzlingly resilient once again. Initial claims have now stayed sub-200K (itself illustrative of a robust workforce) since the first full week of 2023. Continuing Claims reached 1.655 million, below the slightly upwardly revised 1.66 million the week before. Anything below 2 million longer-term jobless claims is also consistent with strong domestic employment.

Q4 Productivity, on the other hand, was nearly cut in half for its final revision this morning, to +1.7% from +3.0% previously reported. Analysts had expected these numbers to cool a bit, but consensus was for +2.5% in the quarter. Unit Labor Costs, the other Q4 shoe to drop, jumped nearly 3x the last revision to +3.2% from +1.1%. Again, analysts were looking for a slightly higher print this time around, but only to about +1.4% or so.

Taken altogether, weak unemployment (meaning stronger implied employment) + weakening productivity + blossoming labor costs = a Fed that may feel it needs to ramp back up rate hikes from their baked-in 25 bps for the next couple months. This is not good news for the market. As February continually brought us economic metrics that proved much more resilient than expected, even if they were mostly still tacking agreeably lower, these March reads suggest something more dire: that inflation may be alive and well.

This again brings us back to the “good news is bad news” discussion; aside from sliding productivity, all of these other data points insist we have a happy, healthy economy. And to a certain respect that is the case. Many analysts expected by now to be seeing cracks in the foundation that may lead to a recession either this quarter or next; it’s hard to make that argument at this stage.

Macy’s (M - Free Report) shares are +6% on this morning’s Q4 report, where earnings of $1.88 per share posted a +19.75% beat from the $1.57 in the Zacks consensus. Revenues of $8.26 billion, +0.52% higher than the $8.22 billion expected. Although full-year guidance was curbed lower on both top and bottom lines in the same report, Macy’s shares are finally seeing some life after trading -1.1% year to date previously.

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