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TRAIL MIX: JOBLESS CLAIMS, HOME SALES, CONSUMER CREDIT

Thursday brought with it a basket of data that shows a subdued labor market, affordability weighing on home sales, and consumers trying to rein in their credit card debt.

Last week, 215,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, which was 2,000 fewer than the previous week and 3,000 shy of consensus.

Ironing out weekly volatility, the four-week moving average continues to drift sideways, but now with a slight downward bias.

Fresh claims have been bouncing around the low 200,000s for months. This follows June's lackluster employment report, and Challenger Gray's reported slowdown in announced layoffs, the combination of which supports the notion that the labor market remains in low-hire/low-fire mode, as it appears we're not out of the woods with respect to economic and geopolitical uncertainties.

"The underlying trend for job creation is probably not as bad as the subdued – but positive – hiring data for June would have suggested," writes James Baird, chief investment officer at Plante Moran Financial Services. "Conversely, the labor picture isn’t likely as strong as the previously reported nonfarm payroll gains in prior months indicated."

On the other hand, ongoing jobless claims USJOBN=ECI, reported on a one-week lag, ticked 0.4% higher to 1.814 million, just a rounding error south of analyst expectations.

That's the largest continuing claims number since March, and echoes deteriorating jobs confidence in recent consumer survey data, which suggests laid-off workers are finding it increasingly difficult to find replacement gigs.

"Hiring plans have weakened considerably," says Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "The hiring intentions index of the NFIB Small Business Survey fell to a 72-month low in May and recovered only partially in June."

Moving on to the housing market, sales of pre-owned U.S. homes USEHS=ECI unexpectedly decreased by 2.4% in June to 4.09 million units at a seasonally adjusted annual rate (SAAR), according to the National Association of Realtors (NAR).

That's 2.6% shy of the 4.20 million SAAR analysts expected, and marks a reversal from May's upwardly revised 3.7% gain.

In detail, single-family home sales—which represented just over 91% of the total—fell by 2.4%, while the volatile condo/co-op segment dropped 2.7%.

NAR shows a 2.2% monthly increase in the median home price. At June's decelerated sales pace, it would take 4.6 months to sell every home on the market, up from 4.5 months in May.

The weakness occurs against a backdrop of elevated borrowing costs. The average 30-year fixed contract rate has been wafting above the 6% level since September 2022, according to the Mortgage Bankers Association.

"The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions," says Lawrence Yun, NAR's chief economist.

And finally, consumers appear to be paying down their credit cards.

Late Wednesday, the Federal Reserve released its outstanding consumer credit report USCRED=ECI, which showed American consumers unexpectedly decreased their debt by $180 million in May, defying economists' projected $17.10 billion increase.

That's a reversal of April's $20.82 billion growth.

Drilling below the surface, non-revolving credit balances—which include big-ticket items such as autos and tuition—increased by $5.1 billion, a 44.9% deceleration from the prior month.

But revolving credit, which includes credit card debt, was reduced by $5.3 billion.

There's been growing chatter among economists about the increasingly K-shaped economy—in which wealthier Americans (i.e., stockholders) are enjoying boom times, while consumers at the lower end of the scale are suffering a cost-of-living squeeze.

Evidence of that squeeze can be found in the Commerce Department's PCE report, which showed the saving rate holding at 3.0% of disposable income, a 20-year low.

The recent (perhaps temporary) pullback in energy prices might have provided consumers the opportunity (and extra pocket change) to pay down their debt.

(Stephen Culp)

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