Interest Rate Roundup

Thursday, May 01, 2008

Jobless claims up, layoffs up, construction spending down

There's a lot of economic data to digest today. So I'll try to just hit on the major points:

* Both initial and continuing jobless claims rose in the most recent week. Initial filings were up 35,000 to 380,000 while continuing claims topped the 3 million mark. At 3.019 million, they are the highest since April 2004.

* Challenger, Gray & Christmas said layoff announcements jumped 27.4% from a year ago in April. At 90,015, job cuts were also up more than 36,400 from March. Financial cuts topped the list at 18,443, followed by telecommunications (6,810), and computers (4,687).

* The April ISM index was unchanged at 48.6 in April. The prices paid subindex rose to 84.5 from 83.5 in March -- the highest going back to May 2004. The new orders subindex was unchanged at 46.5, while the employment subindex slumped to 45.4 from 49.2. That's the lowest this measure has been since May 2003.

* Construction spending fell 1.1% in March. That was worse than the -0.7% reading that was expected, but February's figure was revised to +0.4% from -0.3%. Private construction spending was down by 1.7%, led by a 4.6% plunge in residential spending. That's the biggest one-month drop since the government began tracking this series in 1993. Nonresidential spending actually increased by 1.9%, led by lodging, office, and communication spending. I suspect this activity will start declining on a fairly consistent basis in 2008.

Net it all out and you get a mixed bag for the markets: Long Bond futures are holding gains from earlier, which were prompted by the lousy jobless claims figures. They were recently up 22/32. The Dow is modestly higher at +23. After initially selling off post-Fed, the dollar has continued to catch a bid that began around 3 a.m. EDT. The dollar index is now up about 70 bps to 73.21.

On an unrelated note, I implore you to read this wonderful quarterly letter from Jeremy Grantham, the chairman at money manager Grantham, Mayo, Van Otterloo & Co. It does a fantastic job of summing up the Fed's responsibility for the recent spate of asset bubbles -- and chastising the moral hazard dilemma the Fed's ongoing bailouts create.


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