New vs. Continuing Claims
Much of the fall off-in claims can be attributed to a drop in the number of people eligible for unemployment insurance. More than a million people lost extensions to unemployment insurance on July 1. Continuing claims, which is a better measure of the underlying health of the labor market, albeit highly volatile, went the other direction and surged during the most recent week, suggesting that those who are out of work are still having a hard time getting a job in this economy (that should not be a surprise to those who read this report.)
On net, hiring is still lagging, especially in the small business sector, which has been critical to employment growth in the past. Indeed, small business confidence actually dropped in June, as concerns about future business opportunities intensified.
Producer Prices Dip
Separately, producer prices continued to moderate, falling 0.5 percent, mostly in response to lower food prices. Energy prices were also down slightly, but were not the primary mover. Core producer prices were essentially flat and supported by increases in "sin" taxes for cigarettes; they do not represent much of a threat to inflation. Indeed, the Federal Open Market Committee (FOMC) confirmed that most of its members were still more concerned about disinflation than inflation when it released the minutes to its June meeting this week.
Manufacturing activity softened with the New York Empire manufacturing index moderating much more than expected in June, and the Fed's index of industrial production inching up in June after surging in May. Producers are starting to curtail production after rebuilding inventories that had overshot on the downside earlier in the year. The recent weakness in retail sales will tend to reinforce this trend over the summer.
A Weak Quarter for Growth
Growth appears to have decelerated fairly sharply since the start of the year, with the economy growing closer to a 2% than 3% rate in the second quarter. That would make it one of the weakest quarters of the recovery, underscoring the difficulty of recovering from a financial crisis, rather than a more traditional inflation- or Fed-induced recession.
The dog days of summer have begun, a bit earlier than we would all like.
Diane Swonk, chief economist at Mesirow Financial, talks to CBS MoneyWatch twice a week about the day's top economic news and developments. Her responses are edited for clarity and length.