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US Economic Data Strong

Posted by Joseph Trevisani on Oct 16, 2014 12:03:00 PM

American industrial production rose sharply in September and initial jobless claims sank to a 14-year low last week mitigating somewhat fears that slowing world growth will drag down the U.S. economy.

The output of the nation's factories, mines and utilities gained 1.0 percent in September, more than double the 0.4 percent median forecast, reversing August's downwardly revised 0.2 percent decline, reported the Federal Reserve today in Washington, D.C. It was the largest monthly jump since November 2012. 

Initial unemployment benefit claims plunged 23,000 to 264,000 the lowest weekly level since April 2000 according to the Labor Department. The four week moving average fell to 283,500 from 287,750 also the smallest total since mid-2000. 

Weak U.S. retail sales data on Wednesday, lower estimates for global economic growth from the IMF and  poor prospects in Europe have shaken investor confidence and prompted world-wide sell-off in stock markets that has cut 7 percent from the Dow since last month's high at 17,350. 

The four week moving average of claims average is considered a good indicator of the health of the labor market and reading consistently below 325,000 are normally associated with strong employment expansion. Job creation has seen a modest acceleration this year over last but the scale has been far below what the economy has experienced in the past. 

In 2013 non-farm payrolls averaged 194,000 each month while the jobless claims 4 week moving average declined from 363,000 in January to 343,000 by the December and averaged 344,000 for the entire year.

So far this year new payroll positions have averaged 227,000 per month as the claims have dropped from 337,000 in January to 300,000 in September and have averaged 316, for the year to date. 

The last time the four week moving average for initial jobless claims fell below 300,000 for an appreciable period was from June 1999 until July 2000 when it measured 287,000. In those 14 months the economy created an average of 243,000 new jobs monthly and that was for a population and economy appreciable smaller than it is today. 

The Federal Reserve also reported today that capacity utilization in the U.S. economy rose unexpectedly to 79.3 percent in September from 78.7 percent in August. Economists had predicted a smaller gain to 79.0 percent. It was the highest utilization rate in over six years since June 2008. 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

ip oct 16

initial 4 wk mv oct 16

 

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