The markets (^GSPC, ^DJI, ^IXIC) are digesting new economic data, with the latest jobless claims and GDP numbers giving Wall Street an updated view of the economy.
Initial jobless claims for the week ending June 22 were 233,000, down 6,000 from the previous week. The decline suggests the job market is cooling slightly. First-quarter GDP growth was reported at 1.4%, in line with analysts’ expectations.
Yahoo Finance’s Josh Schafer breaks down these numbers and offers insight into what they reveal about the current economic situation.
For more expert insights and the latest market trends, click here to listen to this entire episode of Morning Brief.
This post was written by Angel Smith
Video Transcript
This morning’s top news.
A lot of economic data.
The U.S. economy grew at an annualized rate of 1.4% in the first quarter.
That’s in line with analysts’ expectations.
We are also looking at the labor market.
Last week, 233,000 people filed for unemployment benefits for the first time, down from the previous count and below Wall Street expectations.
So let’s take a look at some analysis from Josh Schafer of Yahoo Finance.
There’s a lot of data here this morning.
As we see these numbers dropping, what do you think the market will be most focused on?
Well, Brad II, so I think the general market reaction at this point is that futures have gone up a little bit.
We haven’t seen any big fluctuations in yields, have we?
So I think what the market is generally telling us about this data is that it’s not something to be too worried about.
Remember, we are near record highs.
So, for the market to really take this economic data and see it rally, it’s going to look at things like inflation numbers, not the GD data for the first quarter that ended in March.
But I think one of the things we can take from the GDP numbers is that private consumption has fallen again, down to 1.5% in this third estimate.
First estimate.
It was 2.5.
It then dropped to 2% and then to 1.5%.
So, we’ve been talking a lot about a slight slowdown in the consumer or consumers becoming more cautious.
And what some economists have been saying about this number is that it shows that consumers are becoming a little more cautious when it comes to jobless claims, which is notable because jobless claims had been trending upward for most of June and into May.
Well, it’s that time of year again.
If you look at a graph of initial jobless claims over time, they usually cluster around this time of year, so it’s not necessarily unusual to see them correlate with a rising unemployment rate.
The story continues
The unemployment rate rose to 4%, the highest in just over two years.
And as we see the associated rise in claims, it feels like we’re starting to see some signs of concern here.
So I think the market has probably accepted the fact that jobless claims were lower than last week and even lower than the week before.
Yes, the overall trend is upward, but it’s not rising in an obvious direction week after week.
So, perhaps, no clear interpretation has been forthcoming from the arguments presented so far.
How do you think the market will ultimately interpret these data prints?
Because you’re right.
These numbers aren’t particularly cause for concern, but they also don’t paint the picture of growth we’ve become accustomed to seeing over the past few quarters.
So as you come here today, you can see that things are slowly starting to calm down.
At what point do you think the market will start to take issue with some of these worrying numbers rather than just focusing on what that means for the Fed to cut rates?
That’s interesting.
Good news is like good news.
Bad news is good news, and so on.
Yes, I talk about whether good economic news is good for stocks or bad economic news is good for stocks, and over the last month or so, bad economic news has been good for stocks because there was concern that interest rates were too high, and so the Fed kept talking about cutting interest rates.
And if the economy grows too much, they may worry about inflation and cut back.
How far can we get there?
I’m not sure.
So, I think that’s a big debate right now.
Based on what people have been talking about, I think it has to be something in the labor market.
The No. 1 thing most strategists that you talk to every day will say is that the labor market is the thing to watch.
So when we talk about the labor market, the strongest numbers are going to come next week when everyone wakes up after a night of Fourth of July fireworks.
The dream jobs report is due to be released on July 5th, and that will probably be the key to determining whether the unemployment rate will rise again.
And maybe that’s when the bad news starts to get a little worrying.
If you’re a really positive person, you should be, because we know that once unemployment starts to rise, it usually stays up.
And I think one of the key things to watch now is how it stacks up and continues to rise.
On the other side of the economic data, we have the inflation numbers coming out tomorrow and these are always very straightforward to read.
Want to beat inflation?
Yeah.
So thanks for reminding us that right after the Fourth of July, we’re back here and we’re starting early.
I’m very excited about the jobs numbers.
No, I’m sure it’ll be fine.
So while everyone else is kind of settling down, they’re probably going to want to get an accurate sense of what the job market is doing, and there’s going to be a lot of data coming out on the job market next week.
Whether it is a personal salary from AD P, that will become clear in due course.
Plus, is Fed Chairman Jerome Powell due to speak in Portugal?
So it’s a bit of a rendezvous for him, and an international feel.
Well, about that testimony and that speech.
In fact, it won’t be a holiday for us, Brad.
No, no, but it’s interesting when you talk about where the focus should be right now, or should the focus be more on the labor market.
Because that’s exactly what City’s Stuart Kaiser was telling us yesterday.
He said, “The market is so focused on the inflation rate that it’s missing the bigger story.”
What he sees as the more important data points to this part of the economic cycle, the part where we’re starting to see the labor force weaken.
Many economists feel there is a tendency towards inflation.
It will happen slowly, but it will happen.
And if this trend continues slowly, then we’ll have some idea of what’s going on there. And we might want to look more at the labor market, because we don’t know what exactly is going to happen.
That’s a great point.
Okay, thanks Josh.
