U.S. Weekly Initial JoblessInsurance Claims Fall Again To 2009 Low

U.S. job market continues to improve. That's the message from the Labor Department's report of another decline last week in initial claims for jobless insurance. They're down to 502,000 from 514,000 during the prior week which was revised up from 512,000. The latest figures are the lowest of this year and are down sharply from the March peak of 674,000 claims. The four-week moving average of claims fell to 519,750 and the latest weekly figure was lower than Consensus expectations for 510,000.

Continuing claims for unemployment insurance during the latest week fell a sharp 139,000 to the lowest level since mid-March. The decline reflects the improved job market but may also be a function of the exhaustion of benefits. Continuing claims provide an indication of workers' ability to find employment. The four-week average of continuing claims fell modestly to 5,790,750 and have fallen 14.5% from their peak. This series dates back to 1966. Extended benefits for unemployment insurance fell and reversed the prior week's increase. Through late-October extended benefits averaged 523,061.

The insured rate of unemployment slipped 4.3%, the lowest since mid-March. The rate reached a high of 5.2% during late-June. During the last ten years, there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.

The highest insured unemployment rates in the week ending October 24 were in Puerto Rico (6.4%), Oregon (5.4), Nevada (5.2), Pennsylvania (4.9), California (4.8), Arkansas (4.8), Wisconsin (4.8), Alaska (4.8), Michigan (4.5), North Carolina (4.5), and South Carolina (4.5). The lowest insured unemployment rates were in North Dakota (1.1%), South Dakota (1.1), Virginia (2.0), Wyoming (2.6), Maine (2.5), Texas (2.5), Colorado (2.9), Maryland (3.2), Mississippi (3.5), New York (3.5), Georgia (3.7) and Florida (3.8).

The unemployment insurance claims data is available in Haver's WEEKLY database and the state data is in the REGIONW database.

The Exchange Rate: What's in It for Prices? from the Federal Reserve Bank of Philadelphia is available here.

The Mortgage Bankers Association indicated that mortgage applications rose 3.2% last week and remained up by nearly one-half from last year. But the overall figure masks conflicting trends between mortgage applications for purchase (down) and for refinance (up).

Applications to purchase a home fell hard for the fifth consecutive week and they are down by one-quarter during the period. The decline, no doubt, partially reflects the expiration of an up-to $8,000 Federal tax credit for first-time homebuyers. The credit, however, was recently extended to April of next year. During the last ten years there has been a 51% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. The correlation has lessened recently. Applications to refinance mortgages rose solidly last week and were up by one-half from the June low due to declines in interest rates.

The effective interest rate on conventional 15-year mortgages fell last week to 4.61% which is near the recent low and down from the June average of 5.21%. For 30-year mortgages, the rate also fell last week to 5.11% after reaching a high of 5.79% in early-June. Interest rates on 15-year and 30-year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. Rates on adjustable one-year mortgages rose to 6.94% last week which was the highest level since November of last year.

During the last twelve months, the number of fixed-rate mortgage applications has risen 43.0% while the number of adjustable-rate mortgage applications has roughly tripled.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site here.The figures for weekly mortgage applications are available in Haver's SURVEYW database.

Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967–2006 from the Federal Reserve Bank of Minneapolis can be found here.

MFG IP in the e-Zone rose in September laying a foundation for continued economic recovery. Over three months the annual rate of IP growth is now 1.9% compared to flat over six months and lower by 13.8% over 12-months.

To be sure the lift off in IP is less than in indicators such as the Markit MFG PMI index or the jump in orders. But it takes longer for actual output to be put to work than for indicators of improvement to show progress. The large countries are showing more rapid increases in growth than is EMU as a whole.

For Germany three-month growth is up at an 18.7% annual rate; that is surpassed by the ever volatile results from Spain that skyrocketed at a 29% pace over three months. France is up at an 8% pace; Italy is up at a 4% pace. EU member the UK is lagging as it has MFG IP up at a tiny 0.5% pace over three-months. For this group six-month growth rates are all positive and the three-month results show acceleration compared to six months. Over 12-months IP in all countries still is falling rapidly, at a double-digit pace.

By industry the consumer sector continues to lag. Consumer durables output is off on the month and over three months it is down by -2.1% countered by a three-month rise of 1.6% in consumer nondurables output. Capital goods output is up at a 6.6% pace over three-months. Intermediate goods output is flying at a 13% annual rate of expansion as commodities and raw goods lead the cycle

These figures confirm the trend we already have seen. Consumers are lagging and raw goods are rising strongly. Investment is picking up. Still consumer sentiment is one of the stronger barometers for EMU even though consumer spending and the output of consumer goods has been lagging.