Initial Claims for Unemployment Insurance Fell

Initial claims for unemployment insurance fell a sharp 20,000 to 314,000 last week, the lowest level in two months. Consensus expectations had been for 330,000 claims and the prior week's figure was revised up slightly.

The latest figure covers the survey period for nonfarm payrolls in June and was down 8,000 (-2.5%) from the May period.

During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 65% correlation with the level of continuing claims.

The four week moving average of initial claims fell slightly to 333,000 (-3.5% y/y).

A 38,000 decline in continuing claims for unemployment insurance retraced most of the prior week's downwardly revised 56,000 jump.

The insured unemployment rate fell back to 2.0% from 2.1% the prior week.

More Life vs. More Goods: Explaining Rising Health Expenditures from the Federal Reserve Bank of San Francisco can be found here.

Consumer confidence has eroded in Italy this month, with a decline of 1.4 percentage points in the ISAE indicator to 102.9 from 104.3 in May (seasonally adjusted, 1980=100). Concern over the overall economic situation is the broad source of discomfort, as people's assessment of the "general economic situation" dropped to 76.0 from 83.9 last month. While total confidence remains stronger than 2004 levels, the "general" indicator has fallen below last year's range.

At the same time, people see their own economic situations as holding up -- or at least not worsening as severely. The "personal situation" gauge climbed 1.8 points to 117.1, the highest level since September 2002. Associated survey items, such as household finances and financial expectations are moving in a narrow range, and buying attitudes toward major purchases and ability to save are actually improving. Attitudes about job prospects are mixed. This survey sees unemployment going higher, but new regulations give employers more flexibility about using temporary and part-time workers, so there is uncertainty about their implication for the number of jobs and the financial implications.

These considerations accompany the uncertainty over the EU constitution and the rise in energy costs. Perhaps the surprising thing about this survey is that its final outcome wasn't lower.

In the Netherlands, consumer confidence did drop more sharply, to -26 this month from -22 in May and -16 in April. The components here show the same pattern as in Italy, however, as the macro indicator, "economic climate" plunged to -30 from -22 in May and -8 in April. The "willingness to buy" indicator has been fairly stable, with -23 this month after -22 in May and -20 in April. The deterioration in these data break an improving trend that had run from mid-2003 to this spring, just before the vote over the EU constitution. This too suggests that consumers' worries are more over political uncertainties that about their own economic situation. Not though, please note, that they are optimistic about that, but just that their distress is less intense.