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Inflation Metrics Creep; Jobless Claims Spike to 861K

Thursday, February 18, 2021

Today we get a deluge of economic data ahead of the opening bell: Housing Starts, Building Permits, Import and Export Prices, the Philly Fed and of course Thursday’s Initial Jobless Claims are all out this morning. While mixed overall, they are painting a picture currently dragging pre-market trading. Major indexes are down across the board, following days and weeks of setting record highs.

Initial Jobless Claims came in much worse than anticipated: 861K new filings last week, up from the 770K expected. Revisions to the previous week were also up notably: to 848K from the originally reported 793K — more than 100K new jobless claims in just the past two weeks alone. That said, we’re still within a fairly volatile 10-week period, where high 700Ks were the low range and mid-900Ks the high. Problem is, analysts were expecting the lower range for this read. Now we’re going in the wrong direction.

Continuing Claims at 4.49 million (a week in arrears) keeps taking steps down in an orderly fashion week over week, from an upwardly revised 4.56 million longer-term jobless claims the previous week. A portion of these longer-term unemployed Americans are currently being absorbed in Pandemic Unemployment Assistance (PUA), which is a continuing program for only a finite measure of time. The sooner we can get the U.S. labor market back near where it was, the sooner we won’t need things like PUA.

Import Prices for January jumped: +1.4% was well out in from of the 1.0% expected, and following the upwardly revised +1.0% from December. This marks the largest single-month increase in imports for almost nine years. Stripping out volatile petrol prices, we’re still up 0.9% — double what was expected. Ditto for year over year, also up 0.9%. Exports surprised to the upside even higher: +2.5% from an expected +0.8%. Year over year, Exports are +2.3%.

This is notable inflation-type stuff. We’re seeing it in other economic metrics of late, as the post-pandemic era draws closer (we hope), and it’s translating into an anticipation of interest rates eventually going up. Thus far, we haven’t heard anything to this effect from Fed Chair Powell lately, who still seems intent on begging inflation to catch a spark. We didn’t get much from Fed Governor Lael Brainard on this topic this morning, either, but Atlanta Fed President Raphael Bostic speaks later today.

Philly Fed also grew faster than normal for February: 23.1 versus 19.2 expected. Still down from January’s 26.5, but remains in the higher range we’ve seen since the manufacturing survey bounced back last summer.

Finally, Housing Starts for January fell 6.0% to 1.58 million, from 1.66 million expected and down from the upwardly revised 1.68 million from the previous month. Year over year, the homebuilding industry is down 2.3%. While companies race to fulfill higher demand in residential real estate, they’re being met by things like record-high lumber prices, taking the edge off new starts. These numbers are seasonally adjusted and annualized.

Building Permits, however — the main forward indicator of future Housing Starts — ramped up 10.4% in January, well ahead of the -2.3% drop expected. A total of 1.88 million seasonally adjusted, annualized units was also notably higher than the 1.67 million expected. So while we’re seeing profit struggles slowing home construction a bit as of last month, it’s not stopping home buyers from moving up and out.

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