New Initial Jobless Claims reported from last week finally got back to “normal” levels: up another 11K claims from an upwardly revised 223K reported last Thursday to 234K. This is back within the multi-year range we’d seen that has been consistent with a robust U.S. labor market. When we dropped down to 211K a couple weeks ago and threatened to stay there, that was just an insanely good read on domestic employment, and hard to give a reasonable narrative to.
Continuing claims are still well toward historic lows, reporting 1.74 million from last week. This read is up from an upwardly revised 1.712 million the previous week, which was also cray-cray in terms of labor market strength. Experts weren’t able to tell us where the bottom of these reads may have lain, but it’s quite possible we’d been scraping the barrel over the past few weeks. A week from tomorrow brings us a fresh read on non-farm payrolls; will unemployment fall to under 3.9%, as these recent low claims numbers may indicate? We shall see.
Yesterday, after the opening bell, we got new data on PMI Manufacturing and Services. Both reads came out hotter than we’d seen in a while — Services at 55.7 in May was up from the previous month’s 54.6, and notching a 3-month high in the process. Manufacturing inched up 10 basis points sequentially to 56.6 in May, which was the highest we’ve seen since September of 2014. For both of these metrics, +50 points indicate growth.
All of this is consistent with economists’ current collective read of between 2.5%-3% GDP growth. Some would say economists are being unreasonably conservative, and new Q2 headlines for GDP might be closer to 4%. This may relate to Q1 growth from year-ago levels, which have put up a solid 1% year over year to 2.3%. Due to seasonal headwinds at the start of just about every year, Q2 results almost always result in a pop to the upside. How big that pop is remains to be determined.
In any case, none of this seems to be buoying major U.S. indexes this morning. Twenty minutes before the opening bell, the Dow, Nasdaq and S&P 500 are all indicated to open lower. We started the week up, then experienced a bit of a sell-off. But yesterday afternoon the indexes rallied a bit to finish in the green across the board. All this without benefit of any economic data at all of the importance of new jobless claims or PMI results.