U.S. Jobless Claims at Lowest Level in 4 Decades As Q1 GDP Growth Slows to 2-year Low
Two economic reports have led to confusion on Thursday as the government announced that last week’s jobless claims hovered at a four-decade low. The data shows numbers were revised down from the previous week to 248,000 claims, the lowest level since 1973.
The report shows that the United States labor market is the strongest component of the economy.
Following the news on jobless claims came news that the country’s economy reached its slowest growth rate in two years. Businesses are slashing investment by the largest amount since the Great Recession, which is concerning.
The GDP slowed to an annual rate of 0.5% in Q1 2016.
Alarm bells haven’t gone off just yet. Economists are looking towards the amount of jobs created in April as an indicator for growth figures for Q2 and beyond. Economists expect job growth to reach 200,000 on the quarter.
Spring is consistently the fastest-growing quarter of the year, and economists forecast GDP growth to reach 2.6% at this time.
The good news is that the same pattern was seen in Q1 2014 and Q1 2015. Tougher global sales have caused many companies to cut spending on structure by 11% and new equipment by 8.6%. Companies stocked up during the summer, and production may have slowed to bring inventories back down.
Economists also don’t believe that business investment will have much strength in 2016.
Exports also slid by 2.6% on the quarter.
It will be interesting to see what the future holds for jobless claims if GDP growth does not pick up speed. The figures are eerily similar to 2007 – 2009 when the recession hit the country. A weak global economy, falling oil and gas prices as well as a stronger dollar had a major impact on GDP growth in Q1.
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