Initial Jobless Claims, Durable Goods Orders Lower than Expected

The government released two economic reports this morning, and both of them came in below expectations.  The Labor Department released its weekly initial jobless claims data, which showed that initial unemployment claims dropped by 8,000 to 470,000 from last week's revised 478,000.  The moving average, which smooths out the volatility of weekly data, rose by 9,500 from a revised 446,750 to this week's 456,250.

Continuing claims dropped by 57,000 from last week's revised 4,659,000, coming in at 4,602,000.  The four week moving average here dropped as well, falling by 94,250 from last week's revised 4,763,500 to 4,669,250.

On a state level, the news was mostly good, as 30 states reported a drop in claims of more than 1,000.  The leader here was the state of Pennsylvania, which reported a drop of 25,819.  There were three states reporting increases of more than 1,000, lead by California's 43,748.  However, California's increase was due in part to a backlog of claims that the state cleared.

Analysts had expected claims to come in at 450,000, a drop of 32,000 from last week's 482,000 claims.  Projections were for claims to total 400,000 to 480,000, so the actual data was towards the pessimistic side of projections.

An economist at Barclays Capital said that the company expected the labor market "to continue to improve going forward.  The trend in claims has been on a consistent downtrend and we do expect that to continue."  Companies are starting to end layoffs, and some are starting to bring workers back.  That is consistent with a slow improvement in the labor market, which has seen 7.2 million jobs cut since the beginning of the recession in December 2007.

Separately, the Commerce Department reported that orders for durable goods increased by 0.3 percent in December, ending a two month streak of declines.  Excluding the volatile transportation sector, durable goods were up by 0.9 percent.  Analysts had expected durable goods orders to increase by 2.0 percent excluding transportation.

The biggest drop in orders was seen in the non-defense aircraft sector, which nosedived by 38.2 percent.  The largest gain in orders was seen in the defense aircraft and primary metals sectors, which were up by 14.7 and 8.1 percent repspectively.

The increase in durable goods orders is good news, as it means that factories will have to hire more workers if there is more demand for these items.  One potential bright spot here was shown by Ford, which recently announced that it would hire around 1,000 workers for a factory in Chicago.

Without jobs growth, there can be no robust recovery.  Thus, the durable goods number is critical to watch, as that directly relates to factory employment.  All in all, the data is positive, but it is still far from the time to pop the cork on the champagne bottle.