There were two important reports on the U.S. economy released this morning. First, data from the Federal Reserve Bank of Philadelphia showed that manufacturing activity in the Mid-Atlantic region of the country rebounded this month, with the general business conditions index rising from -2.9 to +2.0. This was in line with economists’ expectations but only the third positive (expansionary) reading in the past year. Moreover, measures of new orders, delivery times, inventories, total employment, and the average employee workweek all deteriorated significantly in August, and input cost pressures (inflation) rose. On the bright side, outlooks for general business conditions six months from now improved and capital expenditure plans increased. Managers in the August survey were also asked a series of special questions about their near- and long-term inflation expectations, and respondents on average anticipated that prices received will rise by 1.0 percent over the next year. During this same period, managers reported that consumer prices will likely increase by 2.0 percent, and that worker compensation should rise by 3.0 percent. Looking ahead to ten years from now, surveyed managers on average said that consumer inflation will accelerate to 2.5 percent.
Elsewhere, a report from the Department of Labor showed that the number of Americans making first-time claims for unemployment benefits totaled 262K in the week ending August 13th, a decrease of 4K from the prior week’s figure. This was the best (lowest) reading in a month for initial jobless claims and the 76th weekly print below 300K in a row, the longest such streak since 1973 and a pattern believed to be consistent with an overall healthy labor market. With incoming claims data remaining near historic lows, there is little evidence that layoffs are picking up in America but this does not mean that the pace of job creation cannot slow. In fact, many economists expect to see some sort of pullback in payrolls growth when the August job report is released in a few weeks because of the above-trend strength in June and July. Regardless, the outperforming claims data suggest that employers are reluctant to lay people off, which should be supportive of firmer household spending in the medium-term.
Sources: Econoday, Twitter, Bloomberg, ZH, FRBP, U.S. DoL, FRBSLPost author: Charles Couch