Rising Jobless Claims Indicate Possible Rise in June NFP Data
US jobless claims for the week ended June 20 rose to 627K from a revised higher 612K in the previous week. Economists polled by Bloomberg had expected the figure to drop to 600K, the lowest since the data rose above 600,000 at the end of January. Also seeing a rise, continuing claims for the week ended June 13 rose to 6738K from 6709K. Meanwhile, emergency benefits that grant up to an additional 33 week of benefits climbed by more than 70,000 to 2.43 million. The figure also saw a revision and, as with initial claims, rose more than expected. States posting consider increases in claims included Florida, Pennsylvania and Missouri while Michigan and New York saw a decrease of more than five thousand fewer layoffs.
Markets have been in a considerable tailspin since forming a top early in June. The Dow30 Industrial Average is now down 2.36% on the month following yesterday's close at 8,299.86. From its recent high of 8,799.26 in mid-June, the index is off 6.02% while still posting more than 20% gains from the March 9 low. The weakness seen is partially attributed to rising bond yields, which consequently increase mortgage rates and impede speedy recovery for the housing sector. Also, investor sentiment is rising on the fear that the FOMC will raise rates before the end of the year. Fed funds futures are pricing in expectations of a 21% chance the rate will be lifted to 0.75 before February 2010.
Despite such factors and valuation concerns, another problem is that declining non-farm payrolls, which narrowed sharply in May, are likely to worsen in June. Claims data today showed that total number of employees on benefits, including continuing and emergency, now totals approximately 9.168M. The figure stood at just 2.60 million prior to the start of recession in December 2007. The difference, at over 6.5 million, compares to a much smaller six million jobs lost since the start of recession. This constrast makes a clear cut case for why the June release of non-farm payrolls may post weaker or include revisions to previous figures. Markets may be considering this factor in addition to the aforementioned concerns.
Trading in today's session has US equity futures lower by approximately half of one percent while European markets see declines of around two percent. Bond yields on government securities are currently moving lower while commodity prices post advances. In the currency arena, the greenback is stronger this morning against the majors and by nearly one percent versus the sterling.