Initial Claims for Unemployment Insurance Up Slightly

Initial claims for unemployment insurance rose a slight 7,000 to 325,000 last week. The increase followed the 49,000 plunge the week prior which was slightly greater than reported initially. Consensus expectations had been for a larger increase to 330,000 claims.

The four week moving average of initial claims inched back to 341,750 (-3.7% y/y).

During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.

Continuing claims for unemployment insurance surged 142,000 w/w and the insured rate of unemployment ticked up to 2.2%.

Durable goods orders in December rose 0.6%, right on the Consensus expectation. The advance report of a November surge in orders was little revised. For 2004, the 10.7% gain in orders was the strongest in ten years and led to a 7.1% gain in factory output of durable goods.

Nondefense capital goods orders dropped 1.9%. Aircraft orders fell 16.7% following the 64.7% November spike. Excluding aircraft, orders rose 1.8% but the November gain was halved to 0.9%. For 2004 orders rose 11.5%, the strongest gain since 1997 and led to a 9.5% gain in the industrial output of business equipment, the strongest since 1998.

Orders for computers & electronic products recovered 6.4% (+15.2% y/y) following two months of sharp decline. Machinery orders also rose 3.9% (11.1% y/y) but electrical equipment orders fell 6.1% (+6.2% y/y).

Transportation equipment orders fell 3.0% but less transportation, durable goods orders rose 2.1% (11.9% y/y). Primary metals orders inched 0.3% higher (+28.5% y/y) but orders for fabricated metals fell again (+7.4% y/y).

Unfilled orders rose another 0.5% (9.0% y/y) although shipments surged 2.1% (8.8% y/y). As a result, the ratio of backlogs to shipments fell sharply to the lowest level since August.

Inventories of durable goods dipped slightly (7.4% y/y). Combined with the surge in shipments the decline lowered the I/S ratio to the lowest level since August.

The National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago recovered to 0.39 last month from a downwardly revised 0.05 in November.A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.

The recovery raised the three-month moving average of the CFNAI to 0.33, its highest level since July.

The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories & orders.

During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.

The latest CFNAI report is available here.