INDICATOR: Fourth Quarter GDP (final revision)/Jobless Claims
KEY DATA: GDP: 0.4 percent Jobless Claims: 357,000 (up 16,000)
IN A NUTSHELL: “Rising jobless claims are never good but this may just be the usual volatility not a sign that sequestration and tax increases are starting to eat into growth.”
WHAT IT MEANS: The economy grew a touch faster, if you can use that word, in the fourth quarter than thought. Still, the increase was minimal at best. The second and final for now estimate of economic activity at the end of last year at least keeps growth in the positive range, not the negative that was initially estimated. There were no huge adjustments as consumers spent a little less, business investment was a touch stronger and the trade deficit narrowed a little more. What was good to see were strong corporate profits. Businesses did really well at the end of the year and distributed a lot of that money through dividends, in part to beat the expected tax increase. Company balance sheets are getting better and better and some of that is finally finding its way into wages and salaries. That is critical if consumer spending, which was not great in the fourth quarter of 2012, will improve this year. Stronger balance sheets will also limit the impact on the labor market of sequestration and tax increases. Which brings us to the weekly jobless claims. The claims jump was bigger than expected but these data are hugely volatile. While I believe the rise is nothing to worry about, the surge raises the question whether this is the start of the slowdown being created by sequestration starting to kick in and the tax increase impact beginning to build.