On Jobless Claims, Beige Book And Tariffs

Thursday, March 8, 2018

As during most Thursday mornings, Initial Jobless Claims from the previous week were again reported, sandwiched this week between yesterday’s excellent ADP (NASDAQ:ADP) private-sector payroll results of 235K new jobs and tomorrow’s all-encompassing non-farm payroll report from the Bureau of Labor Statistics (BLS). Today, Initial Claims reported reached 231K last week — 21,000 more claims than the previous week’s figure.

Keep in mind, last week’s 210K claims was the lowest we’d seen since the Vietnam War was still in full force, and the U.S. economy scarcely resembled what it does today. Today’s 231K remains of the robust labor market narrative, in that it rests comfortably within the historically low 225-250K range we’ve seen for most of the past several years. Continuing Claims fell to 1.87 million on the week from 1.93 million the previous week, also parallel with positive employment news overall.

Tomorrow’s BLS report is expected to have fetched roughly 200K new jobs in the month of February, a strikingly high number in such a tight jobs market. We may even see the first 3-handle on the Unemployment Rate in ages, depending on how many more chronically unemployed have finally begun to look for work. And wage growth figures will be closely analyzed, as they are a forward indicator of future inflation pressures on the economy.

Yesterday afternoon, the Fed’s Beige Book was released, confirming much of what economists had long been expecting: employers are raising wages and expanding benefits for their workforces (at least in a “few” districts) as the labor market tightens. The descriptor for wage and price growth, however, remains “moderate” at this time. The report also saw a “marked increase” in the cost of steel in 4 districts as President Trump’s decision last week to slap tariffs of 25% on imported steel move closer to reality.

European Central Bank (ECB) President Mario Draghi, in perhaps a muted response to U.S. steel tariffs, said he considers rising protectionism around the globe a risk to the Eurozone market. He may have also been referring to his home country’s general election, where the Italian parliament looks to be split in half by populists on both the Left and Right, which may lead Italy’s government to consider adopting protectionist measures going forward, as well. The ECB is also dropping its easing bias as the Eurozone economy improves, with inflation seen as rising toward an optimum 2%.

Pre-market futures look to open in the green today: the Dow +29 points, Nasdaq +32 and S&P 500 +6. The 10-year Treasury bond looks to have plateaued, near term, in the high 2.8s — marking a steadiness to the bond market. Of course, a blowout Employment Report tomorrow morning may set all sorts of things into motion; we expect less relative volatility today ahead of tomorrow’s report.

Mark Vickery
Senior Editor

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