US Initial Claims Slow: Durable Goods Orders Surge

The massive amount of US data released simultaneously Thursday ultimately showed that the rate of claims declines continued to slow even as economic activity picked up in the manufacturing sector.

US initial jobless claims filings fell further in the June 20 week, but the level of new filings remains well above one million more than three months after the COVID-19 layoffs began. In other data released at the same time, durable goods orders and shipments rebounded sharply in May, in line with manufacturing conditions data already released. The advance trade gap widened in May, while wholesale and retail inventories declined sharply as sales improved from sharp April declines.

The GDP data were generally in line with the previous estimate, with the headline reading unrevised at a 5.0% decline as expected. PCE contraction was also unrevised, while small movements in the other GDP components were offsetting.

The US Labor Department reported that initial claims filings fell by 60,000 to a 1.480 million level in the June 20 week, well above the 1.340 million level expected and following an upward revision to the previous week’s level to 1.540 million. This was the 12th straight weekly decline, but claims continue to pile up.

The total number of unadjusted new claims filed since the start of the Covid-related shutdowns climbed to 43.3 million. Some of these are likely repeat filers as some rehired workers were let go again as stimulus fund were used up. Unadjusted claims fell by 5,990 in the current week, with the state data showing the largest decline in Oklahoma. Claims in California jumped by 45,930, as an increase in Covid cases led to some areas tightening restrictions after loosening them.

The Labor Department also reported that 728,120 workers filed under Federal Pandemic Unemployment Assistance on an unadjusted basis, down from 770,920 in the previous week.

Durable goods new orders rose by 15.8% in May, well ahead of the 8.5% increase expected after double digit declines in the previous two months. Transportation orders were a key factor in the increase, rebounding by 80.7% in the month after a 48.6% April decline. Outside of transportation, durables orders were up 4.0%, well above of the 1.8% increase expected. Orders were up for all the durable goods components. Durable goods shipments rose by 4.4% and were up 2.3% excluding transportation. The closely watched nondefense capital goods shipments measure rose by 0.4% and was up 1.8% excluding aircraft shipments.

Non-defense capital goods new orders surged by 27.1% and were up 2.3% excluding aircraft after a 6.5% drop in April. The data still indicate significant contraction in the second quarter. Durable goods inventories rose by 0.1% in May after a flat reading in April, while unfilled orders rose by 0.1%, suggesting production was able to meet the extraordinarily strong orders jump in the month.

Advance goods data released Thursday morning showed that May retail inventories fell by 6.1% and were still down 1.5% excluding a 15.0% drop in retail motor vehicles inventories. Wholesale inventories fell 1.2%. The full factory report, including inventories, will be released on July 2.

Finally, the second revision to first quarter GDP did little to change the picture and will likely be ignored in favor of the massive contraction in growth that is brewing for the second quarter. First quarter GDP was unrevised at a 5.0% drop in the third estimate, as expected.

Personal consumption was also unrevised from the previous estimate of a 6.8% decline. A large downward adjustment in durable goods spending was offset by an upward adjustment to nondurables spending. Services spending was roughly unrevised, now reported down 9.8% for the quarter.

Inventory contraction was revised down to $74.8 billion from the $67.2 billion decline in the previous estimate, while the net export gap now stands at $816.6 billion, revised only slightly from $816.0 billion previously reported. The gap remains much smaller than the $900.7 billion deficit in the fourth quarter.

Residential fixed investment was down to an 18.2% increase from the 18.5% increase in the second estimate.

On the upside, non-residential spending was revised up to a 6.4% decline from the 7.9% drop in the second estimate for the quarter, while government spending was revised up to a 1.1% gain from the 0.8% increase previously reported.

The price measures were virtually unchanged. The GDP price index was unrevised at a 1.4% gain, while the core PCE price index was revised up slightly to a 1.7% increase from the 1.6% rise in last month’s report.

Colin Lambert

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