Jobless Claims Likely to Bounce Higher


By Bondsquawk

July 12, 2012

Jobless claims fell by 26,000 people to 350K, well below the consensus of 375K. According to Deutsche Bank’s Global Market Research by Joseph LaVorgna and Carl Riccadonna, July is usually a month of volatile and unreliable data and in this case, subject to unpredictable and variable auto plant shutdowns.

“Normally in July, auto companies will idle capacity in order to retool plants and equipment. This has the effect of raising initial jobless claims which the Department of Labor accounts for in its seasonal adjustment of the data. This year auto companies have been retooling in a more staggered fashion.”

According to Citi’ research by Steven C Wieting and Shawn Snyder, the sharp drop of initial claims should reverse quickly.

“Claims are likely to rebound sharply in the coming week or two as the weekly distortion is unwound. U.S. auto production is slowing with the sales pace after a nearly 30% rise vehicle assemblies over the past year.”

Based on these reports, it would be unwise to make any conclusions about the state of the economy based on positive jobless claims data as weekly fluctuations are bound to occur.

“However, it seems likely that auto production could somewhat hold down the average pace of unemployment claims, on balance, over the course of July and even provide a mild boost to the monthly payrolls data.”

The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.



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