Thursday, March 22, 2007

Jobless Claims Fall Again, Leading Indicators Decline

- Initial Jobless Claims for last week fell to 316K versus estimates of 323K and 320K the prior week.
- Continuing Claims fell to 2501K versus estimates of 2550K and 2570K prior.
- Leading Indicators for February fell -.5% versus estimates of a -.4% decline and a -.3% fall in January.
BOTTOM LINE: First-time claims for jobless benefits in the US unexpectedly fell last week to the lowest in more than a month, signaling strength in the labor market, Bloomberg said. The four-week moving average of claims fell to 326,000 from 329,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, fell to 1.9% from 2.0% the prior week. Almost half of CEOs surveyed at small and mid-sized companies said they were raising pay and benefits to gain and retain employees, according to a survey by Vistage Intl. last week. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Leading indicators fell last month as consumer sentiment declined and builders scaled back construction plans, Bloomberg reported. The decline in the index was muted by higher stock prices, an increase in the money supply and gains in factory orders for capital goods and consumer goods. The ECRI weekly leading index has moved back to near cycle highs this month. I expect US growth to come in substantially below trend this quarter on significant inventory de-stocking. However, I expect growth to begin accelerating again next quarter on inventory rebuilding, rising auto production and increased consumer spending.

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