LIVE MARKETS-Thursday data jamboree: GDP, jobless claims, pending home sales

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THURSDAY DATA JAMBOREE: GDP, JOBLESS CLAIMS, PENDING HOME SALES

An economic triple play greeted investors on Thursday, none of it particularly sunny.

The U.S. economy contracted at a 0.2% quarterly annualized rate in the first three months of 2025 a hair shallower than first reported.

Analysts expected a repeat of the 0.3% decline initially reported by the Commerce Department in April.

Drilling down, business investment was more robust, revised to 10.3% from 9.8%, with a 24.8% surge in spending on equipment as companies rushed to avoid the impending barrage of tariffs. Along those lines, exports were slightly stronger, but so were imports which surged by an upwardly revised 42.6%. Net trade subtracted 5.2 percentage points from the headline, a deeper cut than the originally reported 5 ppt detraction.

Even so, the revision "doesn't warrant a change to our forecast for growth this year or monetary policy," says Bernard Yaros, lead U.S. economist at Oxford Economics. "Major policy developments since the advance estimate matter more for the outlook, and the modest upward revision was primarily driven by an even larger inventory build."

Speaking of which, on Wednesday a U.S. trade court has blocked most of Trump's tariffs from going into effect, so that inventory build may have been all for naught.

"At first blush, this creates major upside risk for growth this year, but we suspect the administration will lean on other legal authorities to maintain tariff levels around current levels," Yaros adds.

Consumer expenditures, which account for about 70% of the U.S. economy, was dialed back to 1.2% growth, or 0.6 percentage points weaker than the initially stated 1.8%. Spending on durable goods decreased by 4.8% as consumers avoided big ticket items amid looming economic uncertainties, and outlays on services were downwardly revised, to 1.7% from 2.4%.

Taken together, consumer spending lent 0.8 ppt to the upside, the weakest contribution since second-quarter 2023.

Turning to the labor market, 240,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI last week, according to the Labor Department.

It marked a 6.2% weekly increase and landed 10,000 north of consensus. It was the third time this year initial claims hit 240k or higher.

Even so, a look at the metric's four-week moving average shows the underlying trend is sideways with a slight downward bias.

Still, "cracks are starting to show in the labor market," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "We see some early signs that the labor market is starting to soften in this report," Allen adds, citing elevated Worker Adjustment and Retraining Notification (WARN) notices and recent Challenger job cuts data.

Ongoing claims USJOBN=ECI, reported on a one-week delay, rose 1.4% to 1.919 million. This is the highest continuing claims print in years and supports recent consumer survey data which shows deteriorating job market optimism as average unemployment duration grows.

This indicates that "a growing number of newly laid-off workers are struggling to find new roles quickly," Allen says. "We think the steady flow of workers separated from their jobs will increasingly struggle to find new work while hiring continues to soften."

Bringing it home, signed contracts for the pending sales of pre-owned U.S. homes USNAR=ECI slid by 6.3% in April, according to the National Association of Realtors (NAR).

It was a much steeper drop than the 1.0% dip economists anticipated, and can be tossed atop the growing heap of recent housing indicators (existing home sales, building permits, mortgage demand, homebuilder sentiment) showing weakness in the sector as borrowing costs remain elevated and political/economic uncertainties keep would-be homebuyers on the sidelines.

But elevated borrowing costs appear to be the biggest deterrent to contract signings.

"At this critical stage of the housing market, it is all about mortgage rates," writes Lawrence Yun, NAR's chief economist. "Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring home buyers back into the housing market."

The pending home sales index continues to wallow near the depths of the April 2020 pandemic shutdown nadir.

(Stephen Culp)

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