MARKET TRENDS: Jobless Claims at Record Low, U.S. Economic Activity High

Initial jobless claims in the U.S. fell to a record low last week, boosting optimism on the growth of the economy and supporting the Fed short term interest rate hike this year. The number of individuals filing for unemployment benefits claims in the week ending July 18 fell by 26,000 to a seasonally adjusted 255,000. This is down from the previous week’s total of 281,000, the U.S. Department of Labor said on Thursday. The fall in claims was larger than the market expectations of 1,000 to 280,000 last week. It is for the first time that jobless claims are below the 300,000-level for 20 consecutive weeks, which is associated with a firming labor market.

The four-week moving average, a better measure of the labor market trends as it compensates for week-to-week volatility, was 278,750, a decrease of 4,000 from the previous week’s total. Continuing jobless claims in the week ended July 11 declined to 2.207 mn from 2.216 mn in the preceding week. Analysts had expected continuing claims to rise to 2.225 mn. The U.S. Dollar Index, which tracks the greenback against a basket of six major rivals, was at 97.19, compared to 97.04 ahead of the report.

Meanwhile, the Chicago Fed National Activity Index (CFNAI), a gauge of U.S. economic activity, surpassed historical levels in the last month. The Index was positive for the first time in the last five consecutive months. The gain in the Index was primarily driven by an increasing production and employment levels. The Index unexpectedly moved to +0.08 in June in contrast to a similar decline of 0.08 in May and an expected decline of -0.05. Any result above zero indicates the national economy is expanding. The production sub index grew, but remained in the negative territory. Production-related indicators moved to -0.01 in June from -0.08 in the prior month. It was led by industrial production, which gained 0.3% last month after falling 0.2% in May. Employment, however, showed strength. The employment indicator increased to +0.12 in June from +0.06 in May, a time period in which the unemployment rate fell to 5.3% from 5.5%. The personal consumption indicators fell to -0.07 in June from May’s -0.05, but the sales components climbed to +0.03 from -0.01 in the same span.

The three-month moving average, designed to smooth out volatility, climbed to -0.01 in June from -0.07 in the previous month. Forty-eight of the 85 individual indicators made a positive contribution to CFNAI in June.

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