Instant View: Jobless claims rise more than expected

NEW YORK (BestGrowthStock) – New claims for unemployment benefits unexpectedly climbed to a nine-month high last week, government data showed on Thursday, yet another setback to the frail economic recovery.

KEY POINTS: * Initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 in the week ended August 14, the highest since mid-November, the Labor Department said. * Analysts polled by Reuters had forecast claims slipping to 476,000 from the previously reported 484,000 the prior week, which was revised up to 488,000 in Thursday’s report. * The four-week average of new jobless claims, considered a better measure of underlying labor market trends as it irons out week-to-week volatility, rose 8,000 to 482,500, the highest since early December. * The number of people still receiving benefits after an initial week of aid fell 13,000 to 4.48 million in the week ended August 7 from an upwardly revised 4.49 million the prior week. * Analysts polled by Reuters had forecast so-called continuing claims rising to 4.50 million from a previously reported 4.45 million.

COMMENTS:

JOE SALUZZI, CO-MANAGER, TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY:

“There’s still no sign of growth there, still weighing down the economy. Until you get those jobs numbers turned around no matter how you spin this, no matter how you look at corporate earnings, it’s not going to work. The economy is not recovering until you get those jobs moving in the other direction.

“If you don’t want to call it a full double dip you’re certainly in a flat line now. And you’re not seeing any growth.

“That said, I wouldn’t be surprised if they take the (stock) market higher today. I’d expect a plunge at the open but I wouldn’t be surprised if we’re green by 10:15 (a.m. EDT). The stock market is not a really good indicator if the economy any more. It doesn’t tell you what’s going on out there.”

JAMES COX, MANAGING PARTNER. HARRIS FINANCIAL GROUP, COLONIAL HEIGHTS, VIRGINIA:

“The 500,000 initial claims was an eye-popping figure especially in view of the fact we were expecting to see claims decrease. The seasonality factor is probably playing to the increase. I am not really sure this is an accurate reflection of the direction of jobless claims.”

ROBERT DYE, SENIOR ECONOMIST, PNC FINANCIAL SERVICES, PITTSBURGH:

“I take this as a mixed report. It’s obviously not good because it shows weakness in the labor market. This may imply the continued effect from the firing of Census workers.

“We are not creating enough jobs for a sustained recovery. This is still a government-aided recovery. I do think we will see more momentum in the fourth quarter, but there are still a lot of headwinds. The next few months will be a critical juncture for the recovery.

“The drop in continued claims is an encouraging sign. We are able to absorb some of these workers in the private sector, but some of them have dropped off the unemployment benefits roll. When you take the life signs on the labor market, it’s not all bad news, but it’s not where we would like.”

FRED DICKSON, CHIEF MARKET STRATEGIST, THE DAVIDSON COS, LAKE OSWEGO, OREGON:

“It’s worse than expected. The jobs issue will continue to hang over the stock market, as it hangs over the rest of the nation, raising continuing issues regarding consumer and investor confidence.

“The data may have some rays in it, but it’s hard to separate out because of seasonal adjustment issues, but the trend isn’t moving in the right direction.

“Earlier (in the week) we got a favorable report on industrial production, and from an investor point of view, we lost that positive from the industrial production numbers.”

JACK ABLIN, CHIEF INVESTMENT OFFICER, HARRIS PRIVATE BANK, CHICAGO:

“It’s what we’ve feared that the job situation continues to dim. Economists keep adjusting their expectations for the data and new information continues to disappoint them on the downside. Not only is it the direction that’s worrisome, but it seems to be the deceleration that’s problematic.

“The more we focus on economic data, the less optimistic we can be for stocks. We’re going to need company data — big blockbuster merger deals, huge earnings announcements — things from the corporate sector that will ultimately buoy this market.”

WILLIAM LARKIN, PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT, SALEM, MASSACHUSETTS:

“I thought the 500,000 claims would have more of a negative impact. I was a little surprised the markets didn’t move that much. I guess it was widely expected to be a bit on the soft side and the reason might be the seasonality. We are in the vacation period and a lot of staff don’t get hired until September.”

WIN THIN, SENIOR CURRENCY STRATEGIST, BROWN BROTHERS HARRIMAN, NEW YORK:

“It’s the highest since November and now we’re in the week of the payrolls survey for August, so this will get people looking for another weak number for the month. Claims fits in with a gloomier assessment of the U.S. economy, and the yen has gained a bit on it. But people are still questioning whether to sell the dollar on weak U.S. data or buy it on a general move away from risk. Our view is the U.S. won’t be isolated. If the economy is going down, there’s no way the euro zone can withstand the slowdown. It’s too early to say we’re headed for a double dip, but things are slowing.”

CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF TOKYO-MITSUBISHI UFJ, NEW YORK:

“You don’t want to take one week’s data as the gospel but it has been a few weeks and unemployment claims are ticking up. It is evidence that the door is being slammed shut on the labor market.

“We’ll have to see where it goes from here — there are some technical factors out there and the seasonal factors seem to be pushing it up a little bit. In other words the unadjusted data isn’t falling as it should for this time of year. But given the trend of claims it looks like the economy ran into a wall in August.”

MARKET REACTION: STOCKS: U.S. stock index futures turn negative after higher-than-expected jobless claims data. BONDS: U.S. Treasury debt prices pare losses. DOLLAR: U.S. dollar falls versus yen.

Instant View: Jobless claims rise more than expected