Economic Indicators' Upside Surprise
Unemployment data leads the charge.
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Initial jobless claims for the week ending May 16 surprising softened a bit to 631,000. The week ending May 9 had shown a jump in claims, initially reported as 637,000. That was revised upward to 643,000. Today's report was down 12,000 from the upwardly revised prior week.
I had expected another rise due to the Chrysler and General Motors (GM) plant shutdowns. A spokesman from the Labor Department said that the auto related states which had an increase in layoffs in the week ending May 9 had a drop in layoffs in the week ending May 16. This is particularly surprising in that GM closed some factories on May 11. I expect the figures for the week ending May 16 will be revised higher by about 20,000.
Continuing claims matched my expectations in setting a record high for the 16th successive week, moving above 6.7 million. Reported with a one week lag from initial claims, continuing claims showed a 75,000 rise in the week ending May 9.
The four-week average of initial claims fell to 628,500 from a revised 632,000. I would be encouraged by these data, but the auto and auto-related layoffs will hit the weekly numbers hard during the next several weeks. The four-week average peaked at 658,750 in the week ending April 4. We believe that peak will hold.
I see the individual weekly high of 674,000 in the week ending March 28 being approached, but not reached in the next month.
Layoffs or planned layoffs announced this week include 6,400 at Hewlett-Packard (HPQ), about 4,000 at American Express (AXP), and 1,800 at Medtronic (MDT).
I see the unemployment rate, 8.9% of the civilian labor force in the April data reported on May 8, reaching 10% this summer, and peaking near 11% in early 2010.
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