Today's Claims data came in stronger than consensus, but I would not conclude that they offer much guidance on whether economic growth is picking up. And, it is still likely that next week's FOMC Statement will drop the comment that "labor market conditions have improved further." But, Fed hawks should still be pushing for rate hikes ahead.
1. Seasonal factors may not have correctly adjusted for Memorial Day, which was in the week. This appears to be particularly a concern regarding the very large 76k w/w drop in Continuing Claims. Typically, a large drop in Continuing in a holiday week is followed by a sizable rebound in the following week.
2. The -4k w/w decline in Initial Claims to 264k brings them back to the relatively tight 260-264k range (of monthly averages) seen from February through April. To be sure, Initial Claims start June below the 277k May average. The latter could have been boosted by the Verizon strike. Or, they could have reflected some slowdown in the economy that month, which today's Claims data would suggest is over.
Both the Atlanta Fed and NY Fed's Nowcasting Models are projecting about 2.5% (q/q, saar) for Q2 Real GDP Growth, while the NY Fed model predicts 2+% growth in Q316 as well. These projections are in line with the Fed's goal and be above what is likely a very low pace of potential growth (1.0-1.7%). So, Fed hawks should still be pushing for rate hikes ahead.
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