September 9, 2010

Trade Deficit Shrank in July; Jobless Claims Drop

Deficit decreases to $42.8 billion, from $49.8 billion, as claims fall by 27,000

Good news dominated the economic data released Thursday, September 9, as weekly jobless claims fell more than expected and the U.S. trade gap saw its biggest improvement in 17 months.

The nation's international trade deficit in goods and services decreased 14% to $42.8 billion in July from a revised $49.8 billion in June as exports increased and imports decreased, the U.S. Census Bureau reported.

The trade number beat expectations, as the consensus forecast was for a $46.8 billion deficit.

Exports rebounded 1.8%, following a 1.3% drop in June, and imports fell 2.1% after increasing 3.1%.

"Today's report is good news for adding a little lift to third quarter GDP growth," according to a Nasdaq news report. "And manufacturers certainly will be happy about the resumption of export growth. But it appears that businesses may be tapping down their expectations for consumer spending with imports of consumer goods down."

On the U.S. jobs front, there were fewer unemployed workers filing jobless claims this week, with a drop of 27,000 to 451,000 in the week ended September 4 from the previous week's revised figure of 478,000, the U.S. Labor Department reported. The revised figure was 6,000 higher than the original number reported last week.

Economists' consensus was for only a 2,000 drop in weekly claims.

However, the lower jobless claims numbers indicate that hiring has stalled more than it has improved. A healthy economy usually sees claims drop below 400,000, and they reached a 2010 peak of 504,000 in mid-August.

The four-week moving average also was down, to 477,750, a decrease of 9,250 from the previous week's revised average of 487,000. Continuing claims stood at 4.478 million during the week ended August 28, a decrease of 2,000 from the preceding week's revised level of 4.48 million. The advance seasonally adjusted insured unemployment rate was 3.5% for the week ending August 28, unchanged from the prior week.

"In theory the jobless claims level came in better than expected, but regardless there are still 451,000 more people now out of work," said John Lekas, founder and CEO of Leader Capital, where he functions as senior portfolio manager of the Leader Short Term Bond Fund (LCCMX) and Leader Total Return Fund (LCTRX) launched in early August. "We have to keep in mind this was a weekly number. Continuing claims actually came in at 4.478 million, higher than the consensus estimate of 4.45 million."

The U.S. markets opened higher Thursday before the trade and claims releases after the Bank of England announced that it will keep U.K. interest rates on hold at a record low of 0.5% for the 18th month in a row.

Read about economic data from Thursday, September 2, from the archives of InvestmentAdvisor.com.

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