*Jobless Claims Dissapoint, Jump Back Up to 445K*
The US labor market got a rude surprise with today's weekly jobless
claims. We saw the figure jump by 35K to 445K for the week ended
January 1st. Lower jobless claims have been one of the main
fundamental signals that the labor market is healing. Combining this
with December's Non-Farm Payroll Report, it begs the questions if US
economy at its current pace can make enough jobs to dent the
unemployment problem.
Via Bloomberg: " The number of first-time claims for unemployment
insurance payments jumped in the first week of 2011 to the highest
level since October as more Americans lined up to file following the
holidays. Initial jobless claims rose by 35,000 to 445,000, according
to Labor Department data released today.
Today's figures follow a report last week showing the U.S. added
fewer jobs than forecast in December, underscoring the concern of
Federal Reserve policy makers about the labor market. Economic growth
may need to accelerate further and encourage companies to ramp up the
hiring necessary to reduce the unemployment rate."
*Some Good News in US Trade Data, Defict Narrows as Exports Gain*
The US trade balance surprised forecasts, showing the trade gap
narrowing to a 10-month low. Exports were up for a 3rd month, which
means trade may either contribute less of a decline to growth in the
4th quarter, or actually could add to growth overall. It's a
positive development as stronger exports is a good sign for the
manufacturing sector, and global demand for US products. Overall
exports were at their highest level in 2 years. The increase in
imports was mainly driven by higher oil prices.
Via Bloomberg: "Exports increased 0.8 percent to $159.6 billion, the
most since August 2008. Demand for American goods from China reached a
record, and purchases from Germany were the strongest in two years.
Imports increased 0.6 percent to $198 billion. The value of crude oil
purchases increased to $19.8 billion from $18.9 billion in October.
The price per barrel of imported crude reached the highest level since
May. The trade gap with China was little changed at $25.6 billion, as
U.S. demand for their goods also climbed. Growing American demand for
computers made in China helped widen the U.S. deficit in advanced
technological products to the highest level on record.
*Producer Prices Rose 1.1% in December*
Headline producer prices were 1.1% higher in December compared to a
month ago. That's a pretty sharp rise, but if we look deeper we see
that the core PPI was only up 0.2% – matching expectations. That
means most of the increase comes on the back of volatile items such as
energy and food.
Looking at annual terms, PPI was up 4.0%, sharper than expected, while
the annual core-PPI came in a lower than expected 1.3%. While that was
smaller than the forecast figure of 1.4%, it was higher than
November's 1.2% gain.
The higher energy prices are a result of higher oil, and so while
there is some inflationary pressure from commodities, it seems overall
PPI prices remain pretty subdued.
*What Does Today's Data Mean for USD?*
The US Dollar has been weaker this week on the back of risk appetite
in Europe as we had some positive developments in the Euro-zone
sovereign debt saga. Today's reports show several things, and will
be taken as a mixed bag.
1. The weaker labor market data will make analysts a bit more cautious
about their projections for what US business are willing to do right
now in terms of hiring. It's been slow and steady and perhaps a hope
that US labor market may be turning a corner need some extra healthy
skepticism. I still remain upbeat about US economy, but a thawing
labor market would be a key component to changing the mind of the Fed.
On this front – is the US labor market healing? – we took a step
back today.
2. The trade data means that trade can perhaps finally add to US GDP
growth in the 4th quarter. It's 2 months in a row that the trade
balance has come in below expectations. It's a big goal of Obama
administration to increase US exports, so a weaker US Dollar and
stronger demand from emerging markets can perhaps keep this positive
trend going.
3. Inflation data shows a pick up in energy prices, we saw that in
trade data as well. But, core prices remain subdued. This shouldn't
phase the Fed, but if oil prices keep climbing higher it will present
bigger problems for US consumers and producers.
Again, a mixed bag. If the theme of the day remains higher equities
and risk appetite, then these reports will not deter further USD
selling.
Tomorrow we have another batch of US economic indicators including
Retail Sales, Consumer Prices, Industrial Production and UMich
Consumer Sentiment.
Source: Fxstreet.com
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