The major equity indexes were mostly higher on Thursday, except for the Dow Jones Industrial Average, after a choppy trading day. The head of the European Central Bank was quoted as saying that economic growth was likely to be weaker than expected and the United States was far from a China trade deal.
Demand increased for safe-haven assets with the 10-year Treasury yield dropping to a one-week low, due to anxiety about slowing global growth and trade.
On top of the U.S.-China trade war and its global effects, investors also worried about the economic impact of the government shutdown, now in its 34th day.
Earlier data showed last week’s applications for U.S. unemployment benefits falling to a more than 49-year low though claims for several states including California were estimated.
Two bills to end the shutdown – one backed by Republicans and one by Democrats – failed to win enough votes in the Senate as lawmakers eyed other potential compromises to end the impasse with the White House.
Nasdaq was supported by strength in chipmaker and airline stocks after earnings reports.
Benchmark 10-year notes last rose 12/32 in price to yield 2.7139 percent, from 2.755 percent late on Wednesday.
Domestic oil prices rose by 1 percent, boosted by the threat of sanctions on Venezuela, but gains were capped by data indicating record high gasoline inventories and an unexpected big build in crude stocks.
West Texas rose 51 cents to settle at $53.13 a barrel, a 0.97 percent gain. Brent crude fell 5 cents to settle at $61.09 a barrel.
Unemployment Claims Fall
The number of new claims for unemployment benefits fell to a 49-year low last week, but the decline likely overstates the health of the labor market as claims for several states including California were estimated.
Still, labor market conditions remain strong, which for now should help to temper fears of a sharp slowdown in economic growth. The economy is facing several headwinds, including a month-long partial shutdown of the federal government, which is starting to hurt both consumer and business confidence.
Initial claims fell by 13,000 claims to a seasonally adjusted 199,000 claims for the week ended January 19, the lowest level since mid-November in 1969 when 197,000 applications were recorded. Data for the prior week was revised lower to show 1,000 fewer applications received than previously reported.
Claims for California, Kansas, North Dakota, Virginia, West Virginia and Hawaii were estimated last week because of Monday’s Martin Luther King holiday.
This suggests last week’s surprise decline in claims probably exaggerates the labor market’s health. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell by 5,500 claims to 215,000 claims last week.
The partial shutdown of the federal government so far appears to be having a limited impact on the claims data. The number of federal workers filing for jobless benefits rose 14,965 to 25,419 in the week ending Jan. 12. Claims by federal workers are reported separately and with a one-week lag.
About one-quarter of federal agencies have been shuttered since Dec. 22, impacting 800,000 government employees, with many working without pay and others furloughed. All workers will be paid retroactively when the shutdown ends.
Look for the shutdown to send the unemployment rate above 4.0 percent in January as the furloughed workers would be considered unemployed.
The jobless rate rose two-tenths of a percentage point to 3.9 percent in December as strong labor market conditions attracted some unemployed people back into the labor force.
Thursday’s claims report showed the number of people receiving benefits after an initial week of aid decreased 24,000 to 1.71 million for the week ended Jan. 12.
The four-week moving average of the so-called continuing claims rose by 1,250 claims to 1.73 million claims. The continuing claims data covered the week of the household survey from which January’s unemployment rate will be calculated.
Continuing claims rose 5,000 between the December and January survey periods. If there were no government shutdown, the modest increase in continuing claims between the survey weeks would suggest little change in the unemployment rate this month.
Latest Economic News
The Commerce Department is one of the agencies whose funding has lapsed as a result of the deadlock in Washington. The publishing of data produced by the department’s Bureau of Economic Analysis and Census Bureau has been suspended, leaving forecasters in the dark regarding the economy’s health.
The limited data available from independent institutions, including the Federal Reserve suggests the economy slowed in the fourth quarter and continued to lose momentum in early 2019.
Home resales fell in December and consumer sentiment dropped to more than a two-year low in January.
Some regional Fed manufacturing surveys have weakened in January. The shutdown is likely subtracting at least two-tenths of a percentage point from quarterly GDP growth every week.
Some Wall Street banks, including JPMorgan and Barclays, have reduced their first-quarter GDP growth forecasts to as low as a 2.0 percent annualized rate from as high as a 3.0 percent pace.
Growth estimates for the fourth quarter are around a 2.8 percent rate. The economy grew at a 3.4 percent pace in the July-September quarter.
Other headwinds for the economy include higher interest rates, a fading boost from a $1.5 trillion tax cut package and slowing growth in China and Europe.