LIVE MARKETS-Thursday data parade: Steady claims, solid factory orders, biggest trade deficit jump since 1992

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THURSDAY DATA PARADE: STEADY CLAIMS, SOLID FACTORY ORDERS, BIGGEST TRADE DEFICIT JUMP SINCE 1992

Thursday offered investors a mixed platter of economic indicators, featuring a stable labor market, stronger-than-expected orders of merchandise from U.S. factories and the largest jump in the trade deficit since "Basic Instinct" ruled the box office.

Last week, 209,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, down slightly from the previous week's upwardly revised 210,000, and 4,000 more than analysts expected.

Ironing out weekly volatility, the four-week moving average of initial jobless claims continues to move sideways, with a slight upward bias and within the range associated with healthy labor market churn.

But how do we square these consistently low claims data on the heels of last year's 58% jump in layoff announcements, per Challenger Gray?

Ongoing jobless claims USJOBN=ECI, reported on a one-week lag, unexpectedly dropped by 2.0% to 1.827 million, or 33,000 fewer than economists predicted. This metric remains elevated, and in light of weak hiring and a dour consumer jobs outlook suggests the dip is at least partly attributable to benefits expiry, and laid-off workers are still finding it difficult to find a replacement gig.

"(The) rise in the proportion of people saying jobs are hard to get - in the Conference Board's survey of consumers - to its highest level since February 2021, suggests the unemployment rate is still rising, despite the decline in continuing claims" writes Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "It is a mistake to infer from the recent claims data that the labor market has turned a corner."

Additionally, in an echo from the ancient past, the Labor Department released its second take on third-quarter labor costs USLCP=ECI and productivity USPROP=ECI, leaving them unrevised at -1.9% and 4.9%, respectively.

Separately, the Commerce Department released its international trade report USTBAL=ECI for November.

It showed the difference in the value of goods and services imported to the U.S. and those exported abroad, widened by a whopping 94.5% to $56.8 billion.

The reading is 40% wider than consensus, and marked the largest trade deficit surge in nearly 34 years, or since March 1992, to be exact. For perspective, March 1993 is when South Africa voted to end Apartheid.

Under the hood, exports fell by 3.6%, while the waning effects of the Trump tariffs prompted a 5.0% rebound in imports on the heels of October's 3.0% dip.

Imports, which account for the lion's share of the United States' total international trade, are a GDP detractor.

Bottom line, the bounce-back in imports could put a dent in Q4 GDP.

"This is a step back toward more normal trade deficits," says Carl Weinberg, chief economist at High Frequency Economics, who adds that the report "supports the FOMC’s statement yesterday that the economy is expanding at a solid pace."

Finally, new orders for U.S. factory-made merchandise USFORD=ECI jumped by 2.7% in November, breezing past the 1.6% increase analysts expected and marking a decisive rebound from October's 1.2% dip.

Drilling down, the commercial aircraft category is the jaw-dropper, jumping 97.6%. Excluding transportation-related goods, new orders rose by a languid 0.2%.

A 14.3% drop in orders for defense-related capital goods held the headline number in check.

As the graphic below shows, factory orders have largely leveled off to a flat, range-bound trendline of around $600 billion since mid-2022. This coincides with ISM manufacturing PMI, which has remained fairly consistently in contraction territory over the same time frame.

(Stephen Culp)

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