Economic data suggests 'gradual' recovery continues

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Better-than-expected reads on Thursday's economic data indicates the slow rebound continues.

Initial jobless claims declined to a seasonally adjusted 787,000 in the week ended Oct. 17, from the previous week’s downwardly revised level of 842,000, originally reported as 898,000, the Labor Department said Thursday.

Economists polled by IFR Markets projected 860,000 claims in the week.

Continuing claims fell to 8.373 million in the week ended Oct. 10, from a downwardly revised level of 9.397 million a week earlier, first reported as 10.018 million.

“In a sign that the U.S. labor market continues to gradually recover from the pandemic shock, initial jobless claims fell to well below the consensus forecast,” said Scott Anderson, chief economist at Bank of the West. “This is the third drop in claims in the last four weeks and the lowest [level] since mid-March.”

The states with the largest rise in claims in the week ended Oct. 10 were: California (27,870), Illinois (11,261), Massachusetts (10,481), Georgia (9,292), and Indiana (7,840), while the states with the biggest drops were: Michigan (2,615), North Carolina (2,362), Virginia (1,733), Montana (579), and Mississippi (375).

“Claims in the most recent week jumped fairly dramatically in California,” according to Diane Swonk, chief economist at Grant Thornton. “That may reflect some catch up in claims. The level of claims remains staggeringly high with 17 states now reporting an increase in claims of more than a 1,000 claims in a week. The ranks of those applying for extended unemployment benefits increased, a sign of deeper scarring and an inability to recall more workers. This is starting to look like a more traditional and longer recession, which bolsters the case for more stimulus now.”

Existing home sales
Existing-home sales jumped 9.4% in September to a seasonally adjusted 6.54 million annual pace, up from a downwardly revised 5.98 million level in August, first reported as 6.00 million, the National Association of Realtors reported Thursday.

Economists expected a rate of 6.25 million.

“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” according to NAR Chief Economist Lawrence Yun. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes, given the greater flexibility to work from home.”

Year-over-year sales soared 20.9%.

“Existing-home sales jumped in September, rising to their fastest pace since before the financial crisis, and up more than 20 percent compared to last year,” said Mike Fratantoni, Mortgage Bankers Association senior vice president and chief economist. “Contributing to this surge in sales activity is an improving job market, low rates, and families across the country looking for more — or different — space. The primary constraint to even more sales is the plummeting inventory of homes on the market, which is leading to bidding wars and spikes in home prices across the country.”

Leading indicators
The Leading Economic Index grew 0.7% in September to 107.2 from 106.5, the Conference Board reported Thursday.

Economists estimated an increase of 0.6%.

The increase follows jumps of 1.4% in August and 2.0% in July.

The coincident index gained 0.2% in the month to 101.7, after gains of 0.8% in August and 1.6% in July, while the lagging index fell 0.1% to 107.6, after declines of 0.1% and 1.0% the two prior months.

The rise in LEI was “driven primarily by declining unemployment claims and rising housing permits” said Ataman Ozyildirim, senior director of economic research at The Conference Board. "However, the decelerating pace of improvement suggests the U.S. economy could be losing momentum heading into the final quarter of 2020. The U.S. economy is projected to expand in Q4, but at a substantially slower rate of 1.5% (annual rate) according to The Conference Board’s GDP forecast. Furthermore, downside risks to the recovery may be increasing amid rising new cases of COVID-19 and continued labor market weakness.”

Kansas City Fed manufacturing
Regional manufacturing activity “rose again in October but remained lower than a year ago, while expectations continued to expand,” according to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

The composite index gained to 13 in the month from 11 in the prior month.

The six-month expectations composite index rose to 21 from 18 last month.

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Economic indicators Jobless claims Federal Reserve Bank of Kansas City Manufacturing industry Housing Housing market