U.S. Initial Claims Dip as Continuing Claims Soar

The number of people continuing to receive unemployment benefits rose markedly to 4.611 million in the week ending Dec. 27, marking the seventh week that continuing claims have been above the four million mark. At the current pace, the figure will soon breach the all-time high of 4.713 million recorded in November 1982.

By contrast, initial claims fell to a near- three-month low at 467,000, marking the second straight week that claims have come in below the half-a-million mark. At face value, the two-week trend may signal that firms did heavy firing prior to the holiday season but have since resumed to business as usual, but the holiday period may be responsible for the trend, rather than a labour turnaround, economists say.

"The real economy is weak, and to look at this number too optimistically would be a mistake; the U.S. labour market is fractured and the pace of job destruction remains severe," said Ian Pollick of TD Securities. "Once the special holiday factors work themselves through the data we should see a rather sharp snapback in the weeks to come."

Canadian Manufacturing Tumbles to Record Slowdown

The Ivey purchasing managers index fell to its lowest level ever in December since the inception of the index in 2001. At 39.1, the index was actually above market expectations for a 37.5 reading, yet it was still a move down from 40.2 in November.

The employment component of the index fell to 41 in the month, as 34% of executives said employment conditions were deteriorating, 49% said employment was unchanged, and just 16% reported rising employment.

Stewart Hall, economist at HSBC, said the record low confirms that Canada is in recession. "It is also in line with comparable readings out of the various European and U.S. PMI's suggesting much the same," he added.

President-Elect Obama Calls for Bold Government Stimulus

President-elect Barack Obama said the ongoing crisis was the direct outcome from an "era of profound irresponsibility." He said if bold government action isn't taken, the unemployment rate could reach double-digits, the economy could fall $1 trillion short of its potential, and "we could lose a generation of potential and promise".

"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," he said. "More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."

Obama's recovery plan includes a $1,000 tax cut for the middle-class, infrastructure investments in energy, education and health care, and an investment plan to stimulate the creation of three million jobs.

Industry Survey Says U.S. Retail Sales Fell Beyond Pessimistic Expectations

The International Council of Shopping Centers reported that U.S. retail sales declined far beyond their own forecasts in December. Sales fell 2.2% compared to November, despite the organization's own prediction for a 1.0% decline.

Looking ahead, the ICSC expects another 1.0% monthly contraction in sales for January. The news comes after a string of weak releases from U.S. retailers. Wal-Mart cut its Q4 forecasts dramatically, with the earnings per share from continuing operations to come in between $0.91 to $0.94, rather than previous expectations of a range between $1.03 to $1.07.

U.S. Consumer Credit Declines for Second Straight Month

A Federal Reserve report said U.S. consumer credit fell for the second consecutive month in November, indicating the difficulty Americans are having in gaining access to credit to make purchases.

Total borrowing dropped by $7.9 billion in November, marking the steepest monthly decline in dollar amount since January 1943, and pushing total consumer credit down to $2.57 trillion, a six-month low.

U.S. Commercial Real Estate Market Under Pressure

The Mortgage Bankers Association said the economic slowdown is hurting the commercial real estate market in the United States. Commercial & multifamily mortgage debt outstanding declined 0.1% in the third quarter, compared to the prior quarter, as government-sponsored enterprises and Ginnie Mae broadened their holdings of multifamily mortgages by $14 billion.

"Despite relatively modest new construction activity, the slowdown in job growth, retail sales and other aspects of the economy has led to lower demand for commercial space and to declines in net absorption of space," said the MBA's quarterly report on commercial real estate.

U.S. Natural Gas Storage Decreases in Week Ending Jan. 2

Underground natural gas storage in the United States decreased by 47 billion cubic feet in the week ending Jan. 2, the Energy Information Administration (EIA) reported.

The weekly figure was expected to decline 78 bcf following the huge 143 bcf increase reported last week. Estimates ranged from -55 to -115, according to Bloomberg's survey.

Prior to the release, Scott Speaker, natural gas analyst at JPMorgan Energy Strategy, said the drawdown would be low because of "last week's below-expectations draw and the fact that a number of business and industries close down operations between the Christmas and New Year's holidays."

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