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Jobless claims inch up while revised GDP shows softer growth

REAL ECONOMY BLOG | March 30, 2023

Authored by RSM US LLP

New filings for jobless benefits inched up to 198,000 last week from 191,000 the previous week, staying below the pre-pandemic level, according to government data released Thursday.

Claims numbers have been consistently low recently, showing a resilient labor market where demand for labor continues to be robust.

But most market participants, including us, expect this relative calm to give way to higher volatility as the probability of recession remains elevated. Jobs data, especially new claims data, often follows a non-linear path as a downturn arrives.

Initial jobless claims

Gross domestic product

In a separate report from the Bureau of Economic Analysis, fourth-quarter gross domestic product was revised down slightly from a 2.7% increase to 2.6%, driven by a sharp downward revision to personal consumption.

Consumption spending grew by only 1.0% on the quarter, down from 1.4% in the initial estimate. Services spending was the main factor in that revision, growing by only 1.6% compared with 2.4% in the previous estimate.

While the data is backward looking and comes as the first quarter is about to end, softer service spending is most likely a good sign for the Federal Reserve, which has been focused on fighting inflation.


The report also showed data on corporate profits, which dropped for the second straight quarter. But while the previous drop was only $1.28 billion, this time the drop was $60.46 billion, equivalent to a 2% decline from the prior quarter.

It is now clear that we have passed the peak of corporate profits, especially when monetary and fiscal supports have waned and interest rates remain restrictive.

The fourth quarter marked the first time since the second quarter of 2020, during the depth of the pandemic, that inventory profit valuation adjustments turned positive.

That change suggested not only that firms began to pump the brakes on inventory accumulation, but also that the value of their inventories dropped because of the decline in goods prices.

The decline in overall profits was driven by the utility sector (down by 64.6%), transportation and warehousing (down by 21.6%), and other nonfinancial domestic sectors (down by 22.6%).

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This article was written by Tuan Nguyen and originally appeared on 2023-03-30.
2022 RSM US LLP. All rights reserved.

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