4Q GDP Rises Slightly Less Than Estimates, Initial Jobless Claims Rise More Than Estimates

- Preliminary 4Q GDP rose .6% versus estimates of a .8% gain and prior estimates of a .6% increase.

- Preliminary 4Q Personal Consumption rose 1.9% versus estimates of a 2.0% gain and prior estimates of a 2.0% increase.

- Preliminary 4Q GDP Price Index rose 2.7% versus estimates of a 2.6% gain and prior estimates of a 2.6% increase.

- Preliminary 4Q Core PCE rose 2.7% versus estimates of a 2.7% gain and prior estimates of a 2.7% increase.

- Initial Jobless Claims rose to 373K versus estimates of 350K and 354K the prior week.

- Continuing Claims rose to 2807K versus estimates of 2785K and 2786K prior.

BOTTOM LINE: The US economy grew .6% in the fourth quarter, the same as initial estimates, Bloomberg reported. Consumer spending rose 1.9% in the fourth quarter. Personal Income rose at a 4.1% rate during 4Q. According to Intrade.com the odds the US slips into recession this year have fallen to 61.5% from 77.5% last month. I continue to believe the US will avoid recession as growth comes in around 1% during the first half of the year before accelerating modestly in the second half as the effects of fiscal/monetary stimulus take hold, exports continue to boom to new records, inflation decelerates and companies rebuild depleted inventories.

The number of Americans filing first-time jobless claims for unemployment benefits rose more than forecast last week, Bloomberg reported. The unemployment rate among those eligible to collect benefits, which tracks the US unemployment rate, held steady at a historically low 2.1%. The four-week moving average of claims fell to 360,500 from 361,750 the prior week. Four states and territories reported an increase in new claims, while 49 actually had a decrease. The current trend in jobless claims is still not at levels normally associated with economic contraction. Fed fund futures now imply a 68.0% chance for a 50 basis point cut at the March 18^th meeting. The odds of a 75 basis point cut have risen to 32.0% from 10.0% yesterday. I continue to believe the job market will improve to more healthy levels in the second half of the year and will remain very healthy over the intermediate-term without generating substantial unit labor cost increases, which account for about two-thirds of inflation.