US: claims reverse most of the sharp decline

In the week ended the 21st of January, US initial jobless claims rose by 21 000, from an upwardly revised 356 000 to 377 000, reversing most of the previous week’s decline.
The outcome was slightly weaker than expected as the consensus was looking for an increase to 370 000. The less volatile four-week moving average dropped slightly, from 380 000 to 377 500. The labour department added that there was nothing unusual in the data, but please keep in mind that the week under review included the Martin Luther King Jr Day Holiday, and therefore distortions are always possible. Continuing claims, which are reported with an extra week lag, rose by 88 000 to 3 554 000, significantly above market expectations (3 500 000).

We believe initial claims are still plagued with some seasonal volatility. In the coming weeks however, we believe that the seasonal volatility should start to ease, which should give us a more reliable view on the US labour market.

In December, US durable goods orders rose for a third consecutive month. On a monthly basis, durables rose by 3.0%, beating market expectations (2.0% M/M), while the previous figure was upwardly revised from 3.8% M/M to 4.3% M/M. The details show that part of the strength was based in transportation (5.5% M/M) due to a 18.9% M/M increase in nondefense aircraft. Also excluding transportation, durable goods orders surprised on the upside of expectations, rising by 2.1% M/M, while the consensus was looking for an increase by 0.9% M/M. The details show that strength was based in machinery (6.0% M/M), primary metals (5.1% M/M) and computer and electronics (1.2% M/M), while orders for electrical equipment (-1.1% M/M) and fabricated metals (-1.4% M/M) weakened in December. Shipments of non-defence capital goods less aircraft rebounded by 2.9% M/M after dropping for three consecutive months. After a poor start of the fourth quarter, this outcome is an encouraging sign suggesting that business investment might have been somewhat stronger than most had expected.

After increasing for three consecutive months, US new home sales unexpectedly dropped in December. New home sales dropped by 2.2% M/M to a total number of 307 000, while also the previous figures were slightly downwardly revised. The details show a mixed picture as sales fell in the Midwest (-3.7% M/M) and South (-10.1% M/M), while they rose in the Northeast (46.7% M/M) and West (9.0% M/M). The total number of new homes for sale fell from 158 000 to 157 000, while months’ supply picked up from 6.0 to 6.1. After the strong data of the previous months’, the slight decline is no real surprise, but we were hoping to see some weather-based strength. Nevertheless, the market for new homes remains challenging facing intense competition from distressed properties which often sell at a lower price.