WASHINGTON (MNI) - The latest U.S. unemployment claims and Q1 GDP reports show that the economy is still growing.
Unemployment claims were 300,000 in the week ending May 24, a 27,000 decline. This might reflect the start of the Memorial Day holiday, even though the Labor Department said there were no special factors.
However, in a broad sense claims remain on an improving trend. The May monthly average is 312,000 so far, down from 320,000 in April and 321,000 in March. Even if claims bounce a little in the coming week the trend looks good.
Unadjusted claims were -15,533 for the week, suggesting the move was exaggerated by poor adjustment for the current year's calendar.
Continuing unemployment claims were down 17,000 in the May 17 employment survey week to 2.631 million, and this series remains below the 2.9 million area seen in winter. This also indicates labor market improvement, though part of the move probably is due to benefits expiring. Continuing claims were 2.7 million in mid-April.
In the GDP revision, Q1 real growth was revised lower, to -1.0% from the original estimate of +0.1%. This unexpected and unusually large revision was about twice the usual 'miss' and resulted primarily from nonfarm inventories. The drop in GDP was the first decline since -1.3% in Q1:2011, though there also was significant slowing in late 2012.
Other than the magnitude of the GDP drop, the composition was pretty much as analysts expected as the Commerce Department filled in missing data.
New monthly data on manufacturing, retail, and mining inventories were lower, in part because of revised seasonal factors that were incorporated into the GDP accounts on a "best change" basis. Inventories now show a subtraction of 1.62 points from growth.
Lower inventories came at the same time that consumption was revised higher, primarily in the auto sector. This combination suggests growth ahead as factories produce more to meet demand; the Q1 inventory cut also might have reflected production delays during the harsh winter.
Net exports and residential investment also cut growth. State and local government spending was -1.8%, due to less investment.
Corporate profits data showed profits from current production -$213.4 billion and had no effect from expiring bonus depreciation schedules. Profits before tax posted a mere +$1.4 billion.
The Q1 profit decline was widespread. Domestic financial and nonfinancial and overseas profits all dropped. The recent rally in bonds probably will reverse this trend ahead for financial firms.
GDP prices posted +1.3%, illustrating still modest price changes.