US initial Claims Slow, Durable Goods Plunge

The US data released earlier Thursday offered few surprises, with the level of initial claims continuing to slide, durable goods orders down sharply in April and first-quarter GDP slightly worse than previously reported.

However, a dip in continuing claims suggests that some displaced workers returned to their jobs in mid-May, a positive sign.

Initial claims remain elevated, even this late into the shutdown. The Labor Department reported Thursday that initial claims fell by 323,000 to 2.123 million in the current week, ahead of the 2.050 million level expected and following a small upward revision to the previous week’s level to 2.446 million.

The total number of unadjusted new claims filed since the start of the COVID-related shutdowns 10 weeks ago climbed to 37.2 million.

Unadjusted claims fell by 266,682 in the current week, with the state data showing declines in Florida, California and New York.

The Labor Department reported that 1,192,616 workers filed under Federal Pandemic Unemployment Assistance on an unadjusted basis, down 54,255 from the 1,246,871 reported in the previous week.

Continuing claims, those already receiving benefits, fell by 3.860 million to 21.052 million in the May 16 survey week. The decline was the first since the crisis began and suggests some workers returned to their jobs. The May 16 week’s level is still up sharply from the 18.011 million level in the April 18 employment survey week. The insured rate fell to 14.5% from 17.2% in the previous week.

In other data released Thursday morning, durable goods new orders fell by 17.2% in April, above the 18.5% decline expected, but following a 16.6% decline in March. Transportation orders accounted for a large portion of the decline, falling by 47.3% in the month. With some states reopening in May, demand for finished goods and parts should pick up.

Outside of transportation, durables orders were down 7.4%, well ahead of the 14.5% decline expected, but still representing widespread declines. Orders fell for primary metals, fabricated metals, machinery, computers, electrical equipment, and the all other durables category.

Durable goods shipments fell by 17.7% and were down 6.3% excluding transportation. The closely watched nondefense capital goods shipments measure fell by 12.6% and was down 5.4% excluding aircraft shipments.

Non-defense capital goods new orders rose by 8.2%, but were down 5.8% excluding aircraft. The data suggest that capital spending started for the second quarter down sharply from the previous quarter.

Durable goods inventories rose by 0.2% in April, a second straight gain that reflects the lack of demand. Unfilled orders fell by 1.6%.

The full factory orders report, which includes non-durable goods data as well, will be released on June 3.

Finally, the first revision to first quarter GDP did little to change the picture and will likely be ignored in favour of the massive contraction in growth that is brewing for the second quarter.

First quarter GDP was revised only slightly lower to a 5.0% decline from the 4.8% drop in the advance estimate. Analysts had expected no revision.

Personal consumption contracted by 6.8% in the quarter, a smaller drop than the 7.6% decline in the advance reading, with goods spending revised up sharply to a 0.2% gain from 1.3% decline in the advance estimate. Services spending was revised up slightly to a 9.7% decline from the previously reported 10.2% drop.

Inventory contraction was revised down sharply to $67.2 billion from the $16.3 billion decline in the advance estimate, while the net export gap now stands at $816.0 billion, revised only slightly from $817.4 billion previously reported. The gap remains much smaller than $900.7 billion in the fourth quarter.

Residential fixed investment was revised down to an 18.5% increase from the 21.0% jump in the advance estimate, while nonresidential spending was revised up to a 7.9% drop from the 8.6% decline in the first estimate for the quarter.

The price measures were virtually unchanged. The GDP price index was revised up to a 1.4% gain from the 1.3% advance estimate, while the core PCE price index was revised down to a 1.6% increase from the 1.8% rise in last month’s report.

Kevin Kastner

Julie Ros

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