There were two important reports on the U.S. economy released this morning. First, data from the Department of Labor showed that the number of Americans making first-time claims for unemployment benefits totaled 266K in the week ending July 23rd, an increase of 14K from the prior week’s figure. That was the highest reading in a month for initial jobless claims, and the largest week-over-week gain since early May. As explained last week, though, much of the sharp rise could simply be due to seasonal factors related to automobile production, i.e. carmakers in July will often shut down plants temporarily to retool them for the upcoming new model year. Further, the less volatile 4-week moving average for initial jobless claims fell to 256.5K last week, one of the lowest readings ever and therefore still providing no evidence that layoffs are picking up. The continued downtrend in initial claims also has many analysts optimistic that the sharp slowdown in job creation that occurred in May was only a temporary setback. June’s significant rebound in job growth supports that viewpoint, and additional confirmation may show up next week when the employment report for July is released. Regardless, this was still the 73rd weekly initial claims reading below 300K, the longest streak since 1973 and a pattern believed to be consistent with an overall healthy labor market.
Elsewhere, the Federal Reserve Bank of Kansas City’s composite manufacturing index declined from +2.0 in to -6.0 in July, the 16th negative (contractionary) reading in the past seventeen months. Under the hood, measures of production, shipments, new orders, and employment all softened in July but outlooks on the future generally brightened. There were two notable comments from surveyed managers:
- Revenue levels are back up to 2014 levels. However, profits are off due to workforce issues. We are having difficulty finding capable entry level assembly employees. If national trend to raise minimum wage goes forward a substantial price increase will be required to create any type of profit.
- June is normally our busiest month of the year but this year it was the lowest since 2009. We are seeing some of the worst demand since 2008/09 recession. Our backlog is down 49% compared to 2014. Ag & energy continue to be down, now starting to see other areas down also.
This was the fifth and final report on regional manufacturing activity released for the month of July, with a total of three regions signaling a deterioration in activity and two showing signs of improvement. Altogether this means that it is still too early to tell whether the “industrial recession” in America that started last summer has finally ended.
Sources: Econoday, Bloomberg, Twitter, ZH, U.S. DoL, FRBKC, FRBSLPost author: Charles Couch