For unemployment claims, the devil was in the details; Global oil looked to offer its own cure for high crude prices; China growth beat expectations
"Immigration is as close to a free lunch as there is for America."
U.S. jobs: Devil’s in the details Thursday’s unemployment claims figure – 220k for the week ended January 13 – was the lowest since February 1973, nearly 35 years ago. The Federal Reserve’s January economic survey, the “Beige Book”, reported businesses in most of the Fed’s 12 districts having trouble finding qualified workers and that labor shortages were constraining economic growth “in some cases”. It also found evidence of pay raises, especially where workers are scarce.
But the story isn’t that clear-cut. The Labor Department’s Job Openings report showed the number of available jobs slipping in November month-on-month after having reached a record high in September. And the closely-followed “quits rate” has barely moved since a year ago – 2.1% vs. 2.0%. In addition, the claims-reporting process in Puerto Rico, population over 3.4 million, has still not returned to normal, according to the Labor Department. All this suggests that Thursday’s claims report was statistically much more “noisy” than usual – and a somewhat suspect barometer of economic growth.
Oil: Look out below The International Energy Agency (IEA) expects “explosive” growth in U.S. oil output in 2018, according to the report it issued Friday – just before OPEC and its allies (including Russia) prepared to meet in Oman. There’s much for them to consider. Crude oil prices are up over 60% from their August 2016 lows.1 As a result, U.S. shale oil producers are expected to enter the market in strength. At the same time, the cartel must find a way to balance between supplying much-needed revenue to Saudi Arabia and Russia, among others -- and keeping their own production in line with previously-agreed limits. All of which reminds that the cure for high oil prices – is high oil prices.
China: Strong year Overall economic growth in China picked up in Q4. The economy expanded at an annualized 6.8% vs the year-ago quarter -- the the same rate as Q3, and slightly better than consensus expectations. For the full year 2017, growth came in at 6.9% year-on-year, the first annual acceleration for the economy since 2010, beating the government’s targeted rate of around 6.5%. Contrast the situation in 2016, when growth came in at 6.7%, the lowest rate in over 25 years. The results dispelled concerns that China’s resolute control of rapidly-expanding credit could have put a dent in the overall economy. Instead, the rapid slowdown of fixed-asset investment growth, largely in real estate, was more than made up by growth in overall exports, due to currently global economic growth worldwide.
1 $63.68 and $68.69 per barrel for West Texas Intermediate and Brent Crudes, respectively. Source: Bloomberg, Jan 19, 2018, 1.55 PM ET