Following up on yesterday's article about US fundamental data and how the recent positive data-stream undermines the case for further quantitative easing from the fed in today's Thursday session we have, yet again, some better than expected reports from the US.
Jobless Claims Remain Below 400K
We have talked previously about how that level is consistent with non-farm payroll gains of 150K+ if look at historical data.
It's important to look at the trend when we consider jobless claims as this indicator can be volatile week to week. But the trend (as seen in the 4-week moving average) has been fairly consistent over the last two months with claims declining, hovering just above the 400K level for three/four weeks, and now falling below that level the last two weeks.
This should bode well for the non-farm payroll report for the November period if we can continue to see claims staying below this level.
Housing Starts and Building Permits Show Recent Life in Construction
yesterday, in Wednesday's session, we saw that NAHB housing market index rise the 20 for the November period. This shows that home-builders are more confident about the economic Outlook for their sector, though you need to rise above the level of 50 but index to show more optimists versus pessimists.
well he got some further confirmation of why they were more confidence. While housing starts for the October. Remained an annualized pace of 0.63 million (the same pace in September) we see that building permits - are leading indicator for future housing constructions - jump to 0.65 million from 0.45 9 million in September. Both of those beat expectations.
Here's a look at Building Permits:
Mainly, the construction sector continues to mainly bounce along the bottom but any improvement is still positive news as it is the construction of new homes that adds to the residential investment portion of GDP. perhaps in the fourth quarter we might see a slight pickup in that category in terms of contribution to growth.
Philly Fed Manufacturing Index Still Positive, But Weaker than Anticipated
The Philly fed manufacturing index has had a good predictive power this year in terms of dissipating where the national manufacturing sector has gone.
Early in the year it had risen to high levels, but with the setbacks seem to the sector including the Japanese earthquake which disrupted supply lines and the weak business and consumer confidence in the summer around the debt ceiling debate and the US credit rating downgrade, the manufacturing sector stumbled as did the Philly Fed index which saw sharp declines.
Most recently it has rebounded back above the zero level and that corresponded with generally better conditions in manufacturing nationally. For the November period, we see it coming in at 3.6, which is lower than what we saw in October (8.7) and lower than expectations (9.0). The deceleration was seen in new orders where the sub-gauge fell to 1.3 compared to October's 7.8. However, on the plus side, the employment sub-gauge rose to 12.0 from 1.4 in October which is a positive indication for the labor market.
It was certainly positive see the construction sector showing some signs of life in today's and yesterday's reports but overall the levels in that sector continue to remain depressed.
The jobless claims figure certainly show some improvement in the labor market which is an important factor for the Federal Reserve as it moves forward. We therefore anticipate the November non-farm payroll report in the first week of December as a key determinant for what the Fed may do next.
However it is disappointing to see the Philly fed manufacturing index grow at a slower pace than expected which may mean a slow pace for the ISM manufacturing index for November. The ISM manufacturing index had cooled to 50.8 in October after a 51.6 reading in September.