Data releases at 8:30 am EDT saw Durable Goods surpass expectations in April with the biggest monthly advance in 15 months, while the Jobless Claims survey saw an insignificant drop in initial claims and yet another major increase in continuing claims.
New orders for durable goods ― ‘hard’ goods such as cars, appliances, and electronics ― increased by 1.9% in April, a much better results than expectations for a 0.5% gain. This is the biggest monthly gain since the recession began in December 2007. Even still, April’s gain wasn’t enough to outweigh the downwardly revised 2.1% decline in March.
The monthly advance was led by auto demand and increased defense spending, but business equipment failed to follow suit. Indeed, Jennifer Lee from BMO Capital Markets said the report was “littered with negativity.”
“The downward revisions to the prior month was a little disconcerting,” Lee said. “For the headline, March's -0.8% read is now -2.1%. Excluding transportation, the -0.7% figure is now (gulp!) -2.7%. And the outlook for capital spending is a little worrisome.”
Nondefense capital goods excluding aircraft ― a proxy for business investment ― fell 1.5% in April, and the 0.4% advance in March was revised to a 1.4% decline.
Meanwhile, 623,000 Americans filed for initial jobless claims in the week ending May 23. This is actually a decrease from 636,000 in the prior week, but the news can hardly be considered good as it marks the 16th straight week that new claims have exceeded 600k.
Continuing claims, or the number of the people still receiving unemployment benefits, soared by 110,000 in the week ending May 15 to 6.788 million, yet another record high.
“The fact that continuing claims continue to gallop higher in conjunction with a continued lack of job creation is quite worrisome to the future prospects of the U.S. labor market,” said Ian Pollick from TD Securities, adding: “We continue to believe that the U.S. labor market will suffer even after the economy has turned.”
Analysts at DeutscheBank said the labor report would be consistent with an unemployment rate of 9.4% in May, compared to the current 8.9%.