Job Market Still Healthy, Leading Indicators Fall Again

- Initial Jobless Claims for last week rose to 308K versus estimates of 306K and 297K the prior week.
- Continuing Claims rose to 2439K versus estimates of 2415K and 2421K prior.
- Leading Indicators for May fell .6% versus estimates of a .5% decline and a .1% fall in April.

BOTTOM LINE: First-time claims for unemployment benefits in the US rose last week from a four-month low to a level that suggests strength in the labor market, Bloomberg said. The four-week moving average of claims fell to 311,250 from 316,250 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held at 1.9%. I continue to believe the labor market will remain relatively healthy over the intermediate-term without generating substantial unit labor cost increases, which account for two-thirds of inflation.

An index of US leading economic indicators fell in May by the most in nine months, signaling the robust pace of growth earlier this year will give way to a slower expansion, Bloomberg said. According to a recent survey by Bloomberg, economists expect US growth to average about 3% from this quarter through the first quarter of 2007. Building permits subtracted .06 percentage points from the index. I continue to expect US growth to slow to around average levels through year-end. Another period of concern that the economy is slowing too much is likely over the next 6 weeks. I continue to expect the Fed to hike rates only one more time before a “pause.”