Low Weekly US Jobless Claims, Robust Corporate Profits Highlight Economy's Resilience

  • The number of Americans filing new applications for unemployment benefits dropped to a four-month low last week, suggesting that the labour market remained fairly healthy. The upbeat outlook on the economy was underscored by other data on Thursday, showing corporate profits increased at a more robust pace than initially thought in the second quarter.
  • Strong profit growth should help to underpin the labour market and investment. The economy's resilience could make it harder for the Federal Reserve to deliver another 50-basis points interest rate cut in November, as some investors are hoping.
  • Initial claims for state unemployment benefits dropped 4,000 last week to a seasonally adjusted 218,000 for the week ended Sept. 21, the lowest level since mid-May, the Labour Department said. Economists polled by Reuters had forecast 225,000 claims. Unadjusted claims decreased 5,957 to 180,878 last week. Though the labour market has lost momentum amid declining job openings and a step-down in hiring, layoffs have remained low.
  • The continuing claims data covered the week during which the government surveyed households for September's unemployment rate. Continuing claims fell between the August and September survey week. The jobless rate slipped to 4.2% in August after rising to 4.3% in July. The increase in the unemployment rate from 3.4% in April 2023 as a surge in immigration boosted labor supply has raised fears of rapid labor market deterioration.
  • A separate report from the Commerce Department's Bureau of Economic Analysis showed corporate profits, including inventory valuation and capital consumption adjustments, increased at a $132.5 billion annualized rate in the second quarter. They were revised up from the $57.6 billion pace estimated last month.
  • The revision reflected a sharp upgrade to domestic profits of nonfinancial corporations, now estimated to have increased $108.8Bn instead of $29.2Bn. That could support business spending on equipment.

(Source: Reuters)