Jobless Claims still elevated

Today we had the release of the 2nd estimate of 1st quarter GDP which came in worse than expected at 1.8% instead of expectations of 2.1%. The first estimate had been also at 1.8% but economist were expecting it might be revised up to 2.1%.

Weekly Jobless Claims continue to be elevated above 400K, they jumped to 425K from 414K last week. I think the data from the May jobs report which will be released next Friday is gaining a lot of importance. It will tell us whether the labor market is slowing down or that we are seeing more churn in the labor market. The increase in jobless claims clearly shows layoffs have increased but it is possible that new hiring has also picked up to compensate for this.  What is really key is the net increase in jobs. The labor market is very dynamic. In a typical month you have 4 to 5 million layoffs and a similar number of new hires and when you net it out, you get the 100-200K increase in jobs. But looking at some of the other macro data I think the chances are higher that the higher jobless claims are pointing to a softer labor market.

The market is reacting negatively to the data, but the impact is not so bad as the stability in the currency markets is acting as a positive. Due to the coming long weekend, trading is going to get light. At this time I don’t have a very strong conviction on market direction either way.

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