Q2 Deficit Shrinks (A Little); Philly Fed, Jobless Claims Good

Thursday, September 19, 2019

Following yesterday’s latest interest rate cut (to 2.00%), in which the Fed laid out a somewhat ambiguous plan for future rate moves, we see new economic data this morning. We are still about three weeks away from the spigot opening for Q3 earnings, so these sorts of data points will likely guide our way forward in the meantime.

The Q2 Current Account Balance was reported ahead of the opening bell today, and came in deeper than anticipated: -$128.2 billion was a bigger hole than the estimates -$127 billion. The Q1 revision steepened even worse, from -$130.4 billion originally reported to -$136.2 billion today.

It doesn’t take much of a reach to see the 12-month-long trade war between the U.S. and China had plenty to do with these extending deficits. We’re not at worst-ever account deficit levels — those came during the cataclysmic Great Recession a decade ago — but we are at the lows of the past several years. The good news is, Q2 bounced back somewhat from Q1; hopefully we’ll see improvement here again over time.

Initial Jobless Claims remained near stellar half-century lows last week: 208K new claims rose 2000 from the upwardly revised 206K from the previous week. But these figures continue toward the low end of our 200-225K range, which has been consistent with an historically robust U.S. labor market, and one we’ve enjoyed now for the past couple years.

Continuing Claims dipped to 1.661 million two weeks ago (these figures are one week in arrears from Initial Claims), lower than the already-low 1.675 million previously reported. Not only are these numbers steadily dwindling, they are also near half-century lows. For whatever wall of worry is building regarding the economy here and abroad, domestic employment is not even a blip on the radar.

A new Philly Fed release also came out this morning, posting a 12 for the month of September. This is down from the 16.8 reported for August and the 21.8 for July, but remains right around the median of the past six months. This survey of manufacturing production in the U.S.’s 6th largest city hasn’t brought about a negative headline since February of this year, though it did post a paltry +0.3 for the month of June.

Mark Vickery
Senior Editor

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