Labor Market Still Healthy, Chicago Manufacturing Strong, Home Sales Slow, Oil Supplies Rise

- Initial Jobless Claims rose to 322K last week versus estimates of 320K and 319K the prior week.
- Continuing Claims rose to 2715K versus estimates of 2625K and 2630K prior.
- Chicago Purchasing Manager for December rose to 61.5 versus estimates of 60.0 and a reading of 61.7 in November.
- Existing Home Sales for November fell to 6.97M versus estimates of 7.0M and 7.09M in October.
- The EIA reported crude inventories rose 118,000 barrels vs. estimates of a 500,000 barrel drawdown. Gasoline supplies fell 1.22 million barrels vs. estimates of a 250,000 decline. Distillate supplies fell 890,000 barrels vs. estimates of a 1.5-million-barrel fall. Refinery utilization rose 0.83% vs. estimates of a 0.63% rise. Natural gas supplies fell 162 bcf vs. estimates of a 160 bcf fall.

BOTTOM LINE: The number of Americans filing first-time claims for unemployment benefits rose last week, remaining below the average for 2005 and suggesting the labor market is still growing, Bloomberg reported. The four-week moving average rose to 325,000 from 324,750. The unemployment rate for those eligible for benefits, which tracks the US unemployment rate remained at 2.1%. I continue to believe the labor market will remain healthy over the intermediate-term as interest rates remain low and businesses increase spending.

An index of Chicago-area business conditions fell less than expected in December as orders increased, suggesting manufacturing in the region remained strong at year-end, Bloomberg said. The prices paid component of the index fell to 83.8 from 94.1 in November. The new orders component of the index rose to 66.7 from 61.6 in November. The employment component of the index rose to 51.7 from 50.3 the prior month. I continue to believe manufacturing will add to US economic growth over the intermediate-term on hurricane and inventory rebuilding.

US previously owned home sales declined in November to an eight-month low, Bloomberg reported. The median home price rose 13.2% from a year-ago to $215,000. The supply of homes for sale rose to 5 months’ worth from 4.9 months’ worth the prior month. Sales fell 3.7% in the West, 2.7% in the Northeast, 1.3% in the Midwest and .7% in the South. I continue to believe the housing market is slowing from its record-setting pace to healthy more sustainable levels.

Overall, the EIA inventory numbers are bearish for the energy complex considering how much talk there has been of substitution away from natural gas.