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INSTANT VIEW: Jobless claims tick up; NY manufacturing weakens

NEW YORK (Reuters) - The number of U.S. workers filing claims for initial jobless benefits increased slightly more than expected in the latest week, a government report showed on Thursday.

EMPIRE STATE MANUFACTURING:

A gauge of manufacturing in New York State fell in May, the New York Federal Reserve said in a report on Thursday, sliding into contractionary territory even though its measure of inflation hit a record high.

KEY POINTS:

JOBLESS CLAIMS: * First-time jobless claims rose to 371,000 in the week ended May 10, from 365,000 for the prior week. Economists surveyed by Reuters had forecast the number of new claims at 370,000. * The four-week moving average of new claims, considered by economists a more reliable gauge of labor trends because it irons out weekly volatility, fell to 365,750 in the week ended May 10 from 366,750 in the prior week. * The number of people who remained on the benefit rolls after drawing an initial week of aid increased 28,000 to 3.06 million in the week ended May 3, the latest period for which figures were available. * It was the third consecutive week that continued claims were above 3.0 million and also the highest since March 2004.

EMPIRE MANUFACTURING: * The New York Fed’s “Empire State” general business conditions index fell to minus 3.23 in May from positive 0.63 in April. * The result was below economists’ expectations for a reading of 0.0 in May. * The prices paid measure of inflation rose to 69.57 -- the highest since the start of the data series in July 2001. In April it was 57.29. * The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

COMMENTS:

SEAN MURPHY, TREASURIES TRADER, RBC CAPITAL MARKETS, NEW YORK:

“Treasuries have gained because the the Empire State manufacturing report was actually down, while continuing claims rose.”

“But if you look at the market from these levels ...positions are very defensive. There is no real fresh wave of buying coming in.”

IAN SHEPHERDSON, CHIEF U.S. ECONOMIST, HIGH FREQUENCY ECONOMICS, VALHALLA, NEW YORK:

JOBLESS CLAIMS: “The trend in claims is still upwards and we expect new highs over the next few months as the consumer financial crisis deepens. The tax rebates will lift retail sales for a couple of months but they will not change the fundamental outlook, so companies will continue to lay off staff in order to try to maintain earnings.

EMPIRE MANUFACTURING: “But orders dipped only marginally and employment rose slightly. Overall softish but the weak $ is helping manuf firms.”

KURT KARL, CHIEF U.S. ECONOMIST, SWISS RE, NEW YORK:

JOBLESS CLAIMS: “To me, it just continues to deteriorate. It’s just grinding higher in unemployment.”

“These numbers are not good news. We are in an elevated unemployment period because of tight credit, higher oil prices, inflation hurting the consumers. We have sectors heading south in terms of employment: housing, autos and financial...It’s a tough time.”

STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO, GREENWICH, CONNECTICUT:

“I don’t think the (NY manufacturing) data is that meaningful. It’s regional. Most of the data has been coming in not suggesting an implosion in the economy, but maybe a leveling out. I don’t think today’s data is swaying that opinion. Jobless claims were in line.”

CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK

JOBLESS CLAIMS: “The pace of layoffs seemed to have stabilized. Continued claims are solidly above 3 millions...As we head further into May, we continued to see layoffs outpacing hire, which means more job losses. If we are lucky, we could see another 20,000 decline like in April.”

N.Y. FED MEPIRE STATE SURVEY: “We are giving back some of the ground back in April. New orders are back below zero. Shipments are down a bit and sentiments are deteriorating. Manufacturer sentiments are close to breakeven, showing a bit nervousness about the level of business.”

These numbers are consistent with the ISM reading in the high-40s. The Philly Fed number has been consistently weaker than the Empire number; it’s not going to go all the way back to zero.”

MARKET REACTION: * BONDS: U.S. Treasury debt prices trim losses. * CURRENCIES: U.S. dollar holds steady, little changed on session. * STOCKS: U.S. equity index futures pare gains. * RATE FUTURES: U.S. short-term interest rate futures edge up, pricing in a 10 percent probability of a 25 basis point rate cut at the Fed’s June meeting versus an 8 percent probability late Tuesday.

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