Thursday, March 7, 2019
A hodgepodge of new market data has been coming out this morning, including new Q4 Productivity numbers, more earnings reports from the Retail sector, a news conference with European Central Bank (ECB) President Mario Draghi, and Thursday’s Initial Jobless Claims read. Markets are poised for a slightly lower open as analysts digest the data.
Q4 Productivity beat expectations of +1.8% by 10 basis points. This is still down from Q3 Productivity, initially reported at 2.2%. Unit Labor Costs ticked up a bit to 2% from the roughly 1.75% anticipated. These key metrics are within the engine of the U.S. economy. While Productivity itself may be relatively slow, at least it’s better than expected. And Unit Labor Costs weigh down on this a tad, but +2% is nobody’s idea of an emergency.
Initial Jobless Claims appear to have found a new equilibrium around the 225K level: 223K for last week is down 3000 claims from the previous week. Winter seasonality no doubt plays a part here — recall late last summer we were reaching 50-year lows in jobless claims — but right around 225K is still consistent with a strong labor market. Continuing Claims dipped from 1.805 million two weeks ago to 1.755 million last week.
We get a fuller picture of domestic employment when tomorrow’s non-farm payroll report from the Bureau of Labor Statistics (BLS) is released, along with a new figure for our Unemployment Rate. Current estimates are for 180K new job gains in February, with an Unemployment Rate of 3.9%.
ECB President Draghi continues to speak at this hour, and his dovish turn in outlook for the economy in the Eurozone had been signaled from earlier reports over the last several weeks. Today, Draghi puts a finer point on this: interest rates will be kept steady throughout the year, longer than originally anticipated. 2019 GDP for the Eurozone has been trimmed all the way to +1.1% from the +1.7% earlier. The inflation outlook for the region has come down to +1.2% from +1.6% initially.
Draghi indicated a slowing adjustment to the Eurozone’s inflation target of 2%. Nobody was particularly expecting this target would be reached anytime soon, but Draghi’s “sizable moderation” this morning makes it official.
Supermarket giant The Kroger Co. (KR - Free Report) disappointed investors when it missed Q4 earnings estimates by 5 cents to 48 cents per share. This is the company’s first earnings miss since Q2 2017. Guidance for the fiscal full year has come down as well. Amazon’s (AMZN - Free Report) continued push into the brick and mortar space may be spooking Kroger shareholders; Kroger has sold off 12% in today’s pre-market following its earnings release, despite quarterly revenues coming in-line with expectations.
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