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Q4 GDP Ticks Down to +2.6%; Jobless Claims Stay Low

Thursday, March 30th, 2023

The second and final revision to U.S. Gross Domestic Product (GDP) is out this morning: +2.6% is 10 basis points (bps) downwardly revised from the first revision, which was down from +2.9% in the initial print. This is down from the +3.2% we saw in Q3 of last year, which followed two quarters of negative GDP: -1.6% and -0.6%, respectively. Year over year GDP for 2022 comes in at +3.9%, 200 bps lower than the very strong 2021, which provided the Great Reopening from the Covid pandemic.

Those two negative quarters in a row in the first half of last year would technically depict a recession, but that’s not the recession bearish analysts are concerning themselves with. It did mark the time the yield curve between 2-year and 5-year T-bills inverted, where it has remained to varying degrees ever since. And now the the Fed is at or near the end of its rate-tightening cycle, it’s something of a ticking clock toward a more meaningful recession taking hold… or not.

Not that our recent trading days have paid any of this much attention. The tendency is currently to move higher, even devoid of meaningful earnings news, though this may be to do more with near-term specifics — a major banking crisis looks to have been averted, for instance — than with projections about a soft or hard landing for the economy at some point down the road. All major indices are in the green ahead of today’s opening bell.

Initial Jobless Claims ticked up to 198K from and expected 195K, which is the same figure as the upwardly revised previous week’s total in new claims. It’s a psychological figure — 200K weekly new jobless claims — but it remains a bit of a head-scratcher considering the amount of high-profile layoffs we’ve seen over the past half-year or more. Perhaps the vast need for additions to the workforce are sopping up the newly unemployed before they can even bother to file for unemployment. That would be the best-case scenario for this disconnect between jobs numbers and their expectations.

Continuing Claims remain under 1.7 million — another psychological figure (in fact, anything under 2 million in longer-term jobless claims would speak of a healthy overall labor market) that cannot seem to be breached by numerous company layoffs of late: 1.689 million was the headline, up a tad from the 1.685 million, which is the previous week’s downwardly revised tally. We haven’t seen a Continuing Claims headline above 2 million since the final months of 2021.

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