Thursday, December 14, 2006

Import Prices Rise Only Slightly After Record Declines, Job Market Still Healthy

- The Import Price Index for November rose .2% versus estimates of a .1% gain and a downwardly revised -2.3% decline in October.
- Initial Jobless Claims for last week fell to 304K versus estimates of 320K and 324K prior.
BOTTOM LINE: Prices of goods imported into the US rose for the first time in three months because of a jump in the cost of natural gas, Bloomberg reported. Outside of natural gas, price gains were minimal. Import prices fell 2.3% in October and 2.2% in September, the largest declines since record-keeping began in 1989. Imports account for roughly 17% of all goods and services. Import prices rose 1.2% from year-ago levels. I continue to believe inflation fears have peaked for this cycle and long-term rates will remain low over the intermediate-term.

Fewer US workers filed first-time applications for state unemployment benefits for a second consecutive week, a sign that demand for labor is holding up, Bloomberg said. The four-week moving-average of jobless claims fell to 327,250 versus 328,750 the prior week. Claims have been distorted the last three weeks by seasonal adjustments even as unemployment remains near a five-year low. The unemployment rate among those eligible for jobless benefits, which tracks the US unemployment rate, held steady at 1.9% last week. Job growth has averaged about 149,000/month so far this year, well above the rate necessary to keep unemployment from rising, notwithstanding housing and auto-related job cuts. Moreover, hourly wage growth is rising at the fastest pace in five years and almost 4 times the rate of inflation. I continue to expect the job market to remain healthy without generating substantial unit labor cost increases over the intermediate-term

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