Thursday economic data: Softening yet solid

Reuters

Thursday economic data: Softening yet solid

Oct 24, 2024 at 3:24 pm GMT

<html xmlns="http://www.w3.org/1999/xhtml"><head><title>LIVE MARKETS-Thursday economic data: Softening yet solid</title></head><body>

Nasdaq gains ~0.5%, S&P 500 up slightly; Dow dips

Cons disc leads S&P 500 sector gainers; Materials down most

Euro STOXX 600 index up ~0.1%

Dollar, crude lower; gold rises; bitcoin up >1.5%

U.S. 10-Year Treasury yield falls to ~4.20%

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THURSDAY ECONOMIC DATA: SOFTENING YET SOLID

Thursday's data provided a nice three-course meal for the Fed (and investors) who are hungry for seemingly contradictory economic signals: the economy is softening but sure-footed enough to avoid sliding into recession.

Last week, 227,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI.

That's a 6.2% decline from the previous week and 15,000 fewer than analysts expected.

The underlying trend, as expressed by the four-week moving average of initial claims, could best be characterized as sideways with an upward bias.

But only slightly upward.

"There is no sign of incipient recession in these figures," writes Carl Weinberg at High Frequency Economics. "The labor market is softening but not imploding."

"Fed policy is aimed at supporting the economy and the job market before a recession shapes up," Weinberg adds. "There is no call for radical monetary easing or fiscal stimulus here."

Stronger evidence of a softening labor market can be found in ongoing claims USJOBN=ECI. Reported on a one-week lag, continuing filings for jobless benefits jumped 1.5% to 1.897 million - the highest level in three years - suggesting it's taking longer for laid off workers to find acceptable replacement gigs.

Next, S&P Global is out with its preliminary "flash" take on the current month manufacturing USMPMP=ECI and services USMPSP=ECI PMIs (purchasing managers index).

Both indexes showed modest improvements, but manufacturing, at 47.8, is still in contraction, while the 55.3 services score remains in expansion territory.

A PMI reading south of 50 indicates monthly contraction, and above that level signifies expansion.

October saw business activity continue to grow at an encouragingly solid pace," says Chris Williamson, chief business economist at S&P Global. "Demand has also strengthened, as signaled by new order inflows hitting the highest for nearly one-and-a-half years, albeit with both output and sales growth limited to the services economy."

Williamson goes on to note that businesses are taking a cautious stance ahead of the U.S. presidential election.

And finally, the sales of freshly constructed U.S. homes USHNS=ECI rebounded in September, rising 4.1% to 738,000 units at a seasonally-adjusted annualized rate (SAAR), according to the Commerce Department.

The topline landed 2.5% to the north of consensus.

And to put sugar on top, August's 4.7% decline was revised to a much shallower 2.3% drop.

The number seems to contradict weak housing starts/building permits data released last Friday, as well as the still-pessimistic NAHB homebuilder sentiment from a week ago Wednesday.

The new construction side of the sector has been the beneficiary of strained pre-owned inventories arising from owners' reluctance to enter the market with mortgage rates drifting along at elevated levels.

But the Fed's pivot to its rate cutting phase, likely has would-be buyers biding their time on the sidelines, waiting for lower borrowing costs.

Or at least that's what the prevailing wisdom's been telling us.

"The obvious factor pointing to higher home sales last month is the fall in mortgage rates from the mid-summer to late September," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

Pointing to Hurricanes Harvey and Milton, along with the recent rebound in mortgage rates, Allen adds "this might be the strongest new home sales number for a while."

(Stephen Culp)

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Initial jobless claims and JOLTS firings https://reut.rs/4e2qIRs