Three economic updates today provide more evidence that moderate growth endures for the US. The numbers du jour—weekly jobless claims, the Chicago Fed National Activity Index, and Markit’s US purchasing managers index (PMI) for manufacturing—paint an upbeat profile of the macro trend. The main takeaway: the deflationary threat festering in Europe has yet to take a bite out of the US economy’s forward momentum.
Let’s start with jobless claims. Although new filings popped higher last week (as expected), the number of claims remains close to a 14-year low. Claims increased 17,000 last week to a seasonally adjusted 283,000, but that’s not surprising in the wake of last week’s spectacular decline. In any case, filings are quite low by the standards of the last decade-plus. More importantly, the year-over-year change continues to slide lower at a healthy rate. New filings dropped a hefty 18% last week vs. the year-earlier level. That’s a bullish sign for thinking that the labor market is poised to continue growing for the near term.
Meantime, the Chicago Fed this morning reports that US economic growth accelerated a bit last month. The three-month average for this business-cycle benchmark increased to +0.25 in September from +0.16 in the previous month. Today’s update marks the seventh straight month of above-trend growth (as indicated by values above zero). As a result, recession risk was virtually nil last month. Only values below -0.70 indicate an “increasing likelihood” that a recession has started, according to the Chicago Fed. (By the way, today’s Chicago Fed report echoes the upbeat review of the macro trend that was posted here at CapitalSpectator.com on Monday via a new edition of the US Economic Profile.)
Meantime, an early peek at the October trend suggests that last month’s macro momentum will carry over into this month. The preliminary estimate of Markit’s business survey data for US manufacturing shows that this cyclically sensitive corner of the economy is still expanding at a healthy pace. True, the October PMI dipped to a three-month low, but the current 56.2 reading remains well above the neutral 50.0 mark that separates growth from contraction.
“Although output growth slowed to the weakest since March, the pace of expansion remains robust,” Chris Williamson, Markit’s chief economist, said in a press release. “Even expanding at this slower rate, the goods producing sector should help drive another solid upturn of the economy in the final quarter of the year.”
A higher level of uncertainty and risk continue to lurk, for the US and the global economy generally. But based on the latest numbers available, it’s clear that a moderate expansion is still the path of least resistance for the US.