US economy stronger than expected but what does this mean for inflation and interest rates ?

Schwaben small S                            Schwaben Blog

 

May 15, 2015

 

Weekly Statistics:

Today

Week Ago Year Ago

15-May-15

08-May-15

16-May-14

S&P TSX

15,108

15,170

14,534

S&P 500

2,122

2,116

 1,885

DJIA

18,272

18,191

16,511

OIL

$59.45

$59.45

 $92.78

USD vs CAD

0.8318

0.8265

0.9072

Gold

$1,225

$1,188

 $1,296

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing towards a strengthening US job market. Initial claims for unemployment benefits dropped 1,000 to 264,000 (seasonally adjusted) for the week ended May 9. Initial jobless claims have importance in financial markets because unlike continued claims data which measures the number of persons claiming unemployment benefits, initial jobless claims measures new and emerging unemployment. Economists polled by Reuters had forecasted claims rising to 275,000 last week. As it is evident from the image below, the data could be volatile but the latest numbers are still near historic lows. A number below 300,00 is usually considered a threshold associated with strengthening labor market. The four-week moving average of claims, considered a better measure of labor market trends as it churns out the week-to-week volatility , fell 7,750 last week to 271,750. This was the lowest level since April 2000. Persistently low firings and greater employment gains should help a gain in wages and support consumer spending. The Federal reserve is still assessing the health of US economy before deciding when to raise the interest rates and unemployment numbers and jobless claims play a key role in that. Now that it’s almost certain that the Fed is not raising rates in June, majority of financial commentators are placing their bets on a rate hike in September. While US economy has overall shown signs of strength, flat retails sales and very low inflation rate could still make Fed to wait a little longer before finally raising interest rates.

US Jobless Claims May 15, 2015

Source- Bloomberg, Globe Investor Gold, Financial Post, Market Watch, Trading Economics

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