Data from the US today showed jobless claims falling to the lowest level in almost 4 years, while headline consumer prices remained flat for a 2nd month straight. Housing starts meanwhile came in weaker than expected showing that the construction sector – despite some improved confidence – still has a way to go to.
US stocks opened positive for the day and held their gains in early New York morning trading. Risk on sentiment which had boosted the euro and other higher yielders against the dollar stabilized, showing a little bit of topping off in key USD crosses.
Jobless Claims Return to Downward Trend
In a positive sign for the US labor market we see jobless claims falling by a larger than expected figure in the most recent week, dropping to 352K, the lowest since April 2008. This follows a sharp increase in claims the previous week to above the 400K level.
The beginning of the year does have lots of volatility inherent in the figures but what this does is put that trend of jobless claims back downward which should help to bolster nonfarm payrolls for the month of January.
From Bloomberg: “Jobless claims plunged by 50,000 to 352,000 in the week ended Jan. 14, the lowest level since April 2008, Labor Department figures showed today in Washington. The median forecast of 41 economists in a Bloomberg News survey projected 384,000. A Labor Department spokesman said the decrease reflected the usual volatility seen during this time of year.
“Claims are always choppy around the start of a new year but there are simply very few industries left that still need to do any further labor cuts,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Workers are slowly being added as demand has started to pick up a bit.”
The labor market situation will be key to the US recovery as it will determine whether consumers feel confident enough to increase spending thereby picking up domestic demand.
Tamer Headline Inflation Gives to Higher Core Prices
Looking at the most recent inflation data we see a trend emerging in rare headline inflation remains flats, for the second month in a row posting a 0% monthly change, but core CPI continues to run positive.
If we look at the annual pace of both headline and core CPI we see a peak and topping off in the headline rate as we fall back down to 3% level in December.
However the core CPI rate continues to edge higher now reaching 2.2%. This shows that the dynamics on prices have shifted as the higher commodity and energy costs seen in the beginning of 2011 Give Way to more underlying price increases.
The FOMC is more concerned with the core CPI and likes to see Ron at around 2%. The implication here is that if core CPI continues to move higher it could hamstring the FOMC from undertaking further monetary stimulus.
Housing Starts Undershoot Expectations
in a negative macro development for the US housing starts grew a less than expected, undermining the the positive home-builder confidence report we saw yesterday’s trading session. Still because of the supply of new homes on the market it’s not necessarily a bad thing that mourn new home constructions are coming onto market. Still this impacts GDP as new homes are counted as residential investment and may hamper hiring in the construction sector.
From Bloomberg: “Builders began work on fewer houses than forecast in December, capping the worst year on record for single-family home construction and signaling recovery in the industry will take time.
Housing starts dropped 4.1 percent to a 657,000 annual rate last month, reflecting a slump in multifamily dwellings, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, were little changed.
Work on multifamily homes, such as apartments, townhouses and condominiums, fell 20.4 percent to 187,000 in December. Construction on single-unit dwellings increased 4.4 percent to a 470,000 rate in December from the prior month, the highest since April 2010.”
- Nick Nasad is the Chief Market Analyst at FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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