The pace of contraction from January to March was slightly slower than expected, but the most recent data on the labor market was worse than forecasts, according to two releases at 8:30 this morning.
The final report on first-quarter GDP improved to -5.5%, up from -5.7% in the last estimate. Forecasters had assumed the GDP numbers would be unrevised.
Two culprits were responsible for the change: businesses reduced fewer inventories than originally though, while imports ― which are a subtraction in GDP ― declined more than in earlier forecasts.
The revisions are unlikely to have much impact on forecasts for the current quarter.
Meanwhile, initial jobless claims remained above the 600k threshold for the 21st consecutive week. The Labor Dept. report said 627,000 Americans filed for benefits in the week ending June 20, a 15k raise from the prior week.
Analysts had been expecting initial claims to moderate to 600k, so this data hurts the idea of imminent stabilization in the jobs market.
However, Joseph LaVorgna from Deutsche Bank said the 4-week average fell to 617k, “the lowest it has been since mid-February, thereby giving us added confidence that the worst of the nonfarm payroll job losses are behind us.”
Continuing claims ― the number of people still receiving unemployment insurance ― was also a disappointment, rising 29k to 6.738 million.
“The positive sentiment due to the decline in last week’s continuing claims data has effectively been muted for the time being,” said TD strategist Ian Pollick.
Earlier this week, President Obama said the unemployment rate would hit double-digits before the recession ends. “It's pretty clear now that unemployment will end up going over 10 percent,” he said Tuesday.