The number of Americans filing new claims for unemployment benefits rose by 1,000 last week, according to a report on Thursday that could stoke fears the labor market recovery has stalled.
The U.S. trade deficit narrowed unexpectedly in April, as U.S. exports rose to a new record and imports from Japan tumbled more than 25 percent in the aftermath of its earthquake, tsunami and nuclear disaster, a U.S. government report showed on Thursday.
WILLIAM LARKIN, PORTFOLIO MANAGER WITH CABOT MONEY MANAGEMENT
IN SALEM, MASS
Ugh. It's not good. At this point in the cycle, everyone believed we'd be on the mend, but it looks like that's not the case.
The problem now is that we've had this market adjustment and we're basically trading off technicals. We're going to be in a very active trading range and we just need a couple of key warnings-- on consumer confidence, energy prices, whatever-- and markets could continue to weaken, which will further increase demand for ultra-safe assets.
DAVID RESSLER, CHIEF U.S. ECONOMIST, NOMURA SECURITIES
INTERNATIONAL, NEW YORK
The trade numbers were a bit of a surprise that suggests a bigger narrowing of the trade deficit than had been expected, probably more than most people had assumed in their Q2 GDP growth forecasts. It points toward a little better growth in Q2 than many people had been thinking before this. A lot of forecasters, ourselves included, had lowered expectations for the second quarter, and this will reverse some of that reduction in expectations but we haven't yet quantified it.
On the one hand (the jobless claims number) is a disappointing confirmation that the number of people continues to run above 400k as it has for the last nine weeks now. But on the more encouraging front it looks like this may be a reflection of job turnover as opposed to sustained joblessness.
We're seeing a decline in the number of continuing benefits, suggesting these layoffs are relatively short-term, not persisting.
I would imagine markets that are looking for some reassurance that we are not going to recession would be pleased to see the trade numbers because they certainly say we are getting some growth from the trade sector.
THOMAS SIMONS, MONEY MARKET ECONOMIST, JEFFERIES & CO, NEW
The trade balance is narrower than everybody thought it was going to be, a 3 billion drop in imports from Japan will be a temporary move, right now it looks like its going to be positive for Q2 GDP, but by the end of June the bounce back will be obvious I think. I don't think we can draw any long term inferences from this data other than its apparent that the Japanese supply chain disruptions are real.
Claims are higher because of poor weather and flooding and a number of natural disasters around the country. I believe it will be transitory but I think claims will be sticky throughout the summer because it seems that we can't get out of our own way with tornadoes and floods, and who know what beyond that.
KEITH HEMBRE, CHIEF ECONOMIST, NUVEEN ASSET MANAGEMENT,
JOBLESS CLAIMS: It's the same dismal trend continuing. It's not getting worse but it's not getting better either. It's not pointing to an acceleration in job growth. We are looking at 100,000 to 125,000 for payrolls in June. On the jobless rate, it would mean it would be flat to an uptick to 9.2 percent.
TRADE GAP: It looks like the trade gap would be reasonably additive to second quarter growth, which is typical of a slowing economy. We are looking at a 1/2 to 1 percentage point addition to GDP from trade. But inventories would likely subtract from growth in the second quarter after pretty decent contribution in the first quarter.
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON
Just as nearly every other economic indicator has suggested stagnation in the recovery mid-2011, claims -- which have consistently posted above-400k readings for two months -- is also suggesting conditions influencing a stall in the labor market. The current average is an improvement from May's and April's (of 426.8k and 432.3k respectively) but still disappointing given that we saw an average of 393k in March.
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON
April's trade deficit of $43.7 bln was sharply below the $48.9 bln consensus, with the breakdown suggesting the surprise was led by a surprisingly steep improvement in the petroleum balance, due to volumes outweighing price changes, and a sharp fall in imports from Japan after the disaster there. The improvement, led by sectors experiencing temporary exceptional circumstances, looks unlikely to be sustained for long. However this data should restrain what had previously been growing pessimism on Q2 GDP, and keep forecasts for the quarter comfortably above 2.0 percent.
MARKET REACTION: STOCKS: U.S. stock index futures add to gains. BONDS: U.S. bond prices pare gains. FOREX: The dollar rose versus the euro.