New U.S. jobless claims rose unexpectedly last week, further evidence of a weak labor market just hours before President Barack Obama delivers a major address to Congress on the issue.
The U.S. trade deficit narrowed much more than expected in July as strong Latin American demand helped push exports to a new record and imports fell slightly, a government report showed on Thursday.
JOBLESS CLAIMS * Applications for unemployment benefits rose to 414,000 in the week ending September 3 from an upwardly revised 412,000 the prior week * Wall Street analysts had been looking for a dip to 405,000 * Excluding one week in early August, claims have held above 400,000 since early April. * The Labor Department said there was no discernible effect from recent hurricanes and storms on the national figures this week.
TRADE * The trade gap totaled $44.8 billion, 13.1 percent less than in June and well below a consensus forecast of $51.0 billion from Wall Street analysts surveyed before the report. * It was the biggest month-to-month percentage drop in the deficit since February 2009.
IAN LYNGEN, SENIOR GOVERNMENT BOND STRATEGIST, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:
The trade data showed a surprising improvement. Exports led the moves at +3.6 percent, with a +4.9 percent increase in real terms. The real trade gap was -$45.3 billion versus -$50.3 billion in June -- adding 0.7 percent to real GDP (if sustained through the quarter), a reversal from expectations for a small drag.
Initial jobless claims unexpectedly increased to 414,000 versus an upwardly-revised 412,000 in the prior week, bringing the 4-week moving-average to 414,750. This is a troubling increase, particularly in the wake of last month's zero non-farm payrolls print and with the Labor Department saying there was no impact from hurricane Irene. Overall, a soft report on labor market conditions.
Treasuries were trading higher ahead of the release and since the data have held the price action with 30s extending their gains.
SAM GINZBURG, HEAD OF CAPITAL MARKETS, FIRST NEW YORK, NEW YORK:
The trade balance was better than expected, and despite worse jobless claims, that could move up GDP estimates and that is why we probably didn't go down more than what we should have on the number. It was telling you there was no indication of the Hurricane Irene effect.
GARY THAYER, CHIEF MACRO STRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI:
Jobless claims numbers have been stabilizing in recent weeks. We're probably seeing an economy that's just growing slowly. We're watching closely for any signs that layoffs are increasing, but so far it looks like we're just holding employment at an unchanged level. So it doesn't look like a recession yet, but we're also not seeing the growth that we saw earlier this year.
Trade was a good number. It showed exports rebounded in July which is an encouraging start to the third quarter. It's going to be important to see what happened in August, but it doesn't look like the global economy was contracting in July. There was still strong demand for U.S. products.
OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON:
Claims above 400k is consistent with a struggling jobs market. On the margin this is mildly negative for the dollar. The data showing a sharp contraction in the deficit is more important as third quarter GDP may be somewhat better than previous quarters. The decline in the deficit is positive for upcoming GDP and a marginal positive for the dollar.
FRED DICKSON, CHIEF MARKET STRATEGIST, D.A. DAVIDSON & CO, LAKE OSWEGO, OREGON:
I don't see this as a surprise. The numbers continue to show that the economy is running at a stall speed and that there are not a lot of reasons for employers to hire.
President Obama's speech has been pretty much leaked out and it is similar to previous stimulus packages for the job market. I'm looking for surprises but at this point, I don't see much of it.
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:
The trade numbers are probably sufficiently better than expected to cause some upward revision in the GDP forecast. We're seeing very strong growth in exports, offsetting some weakness last month, and the strength was in the right place, capital goods, without being centered in aircraft. There's solid foreign demand for U.S. capital goods exports, so that's a hopeful sign for the outlook. There's enough strength abroad going into this apparent slowdown to keep the momentum going.
Jobless claims figures were a bit disappointing. Claims this month are running a bit higher than they were last month so layoffs have picked up a bit but it's not clear that it's a decisive move. Certainly it's not an abrupt cutting of the labor force.
MARKET REACTION: STOCKS: U.S. stock index futures extend losses BONDS: U.S. bond prices hold gains FOREX: The dollar briefly trims gains versus euro after Trichet comments
(The following story corrects Dickson comment to say there are not a lot of reasons)