U.S. Jobless Claims Fall to 218K, Q2 GDP Holds at 3% on Strong Consumer Spending

Weekly Unemployment Claims Decline Slightly

The latest data from the U.S. Department of Labor shows that initial unemployment claims for the week ending September 21 fell by 4,000 to a seasonally adjusted 218,000. This decrease follows a revised level of 222,000 from the previous week. The four-week moving average, which provides a more stable view of labor market conditions, also declined by 3,500 to 224,750.

While the overall number of claims has dropped, the insured unemployment rate remained steady at 1.2% for the week ending September 14. However, insured unemployment increased by 13,000 to 1.834 million, suggesting some labor market softness. Revisions from the prior week adjusted the insured unemployment figures slightly downward.

GDP Growth Revised to 3.0% for Q2 2024

The U.S. economy expanded at an annual rate of 3.0% in the second quarter of 2024, as per the latest estimates from the Bureau of Economic Analysis (BEA). This growth rate is consistent with prior estimates, reflecting a solid recovery from the first quarter’s 1.6% growth. The increase was driven by higher consumer spending, private inventory investments, and nonresidential fixed investments.

Key contributors to the revision include an upward adjustment in private inventory investment and federal government spending, while nonresidential fixed investment and exports were revised downward. Imports, which detract from GDP, were revised upward but did not significantly affect the overall economic growth figure.

Consumer spending was particularly strong, and its acceleration from Q1 was a critical factor in the overall GDP rise. Conversely, residential fixed investment showed signs of weakness, partially offsetting the positive economic trends.

Corporate Profits See Upward Revisions

Corporate profits also saw substantial upward revisions in Q2 2024, with an increase of $132.5 billion. Domestic nonfinancial corporations led the charge with a $108.8 billion gain, while domestic financial corporations saw a modest $42.5 billion increase. However, profits from the rest of the world decreased by $18.8 billion.

Real Gross Domestic Income (GDI) was revised up to 3.4%, marking a significant upward adjustment of 2.1 percentage points. This led to a supplemental measure of U.S. economic activity, the average of real GDP and GDI, rising 3.2%.

Durable Goods Orders Remain Flat

The latest data on durable goods orders for August showed little change, increasing by just $0.1 billion to $289.7 billion. This follows a strong 9.9% increase in July. Excluding transportation, orders rose 0.5%, driven by electrical equipment and appliances, which increased by 1.9%. However, excluding defense orders, the data shows a slight 0.2% decline.

Despite the flat reading, the durable goods sector has shown consistent strength, with orders rising in six of the last seven months. However, the slowing momentum may indicate a cooling in the broader manufacturing sector.

Market Forecast: Mildly Bullish

Based on the data, the economic outlook remains cautiously optimistic. The steady GDP growth of 3.0%, coupled with strong corporate profit revisions and stable labor market conditions, suggests a positive trend for the U.S. economy. However, the slight uptick in insured unemployment and the flat performance of durable goods orders hint at potential challenges.

Given the overall economic resilience, the short-term market outlook leans mildly bullish, particularly in equities tied to consumer spending and corporate profits. However, caution is advised as manufacturing data shows signs of slowing momentum.