Weekly initial claims down to 236,000 as Q2 heads to 3% growth

The Department of Labor reported that In the week ending May 6, seasonally adjusted initial claims decreased slightly to 236,000. That puts the 4-week moving average at 243,500, a decrease of 26,500 from the 270,000 figure at this time last year.

Conclusion: The labor market in the US is tighter today than it was at the same period last year. This, in conjunction with the last jobs report, gives cover to the Fed to hike rates in June. At the same time, expect robust growth for the second quarter. The Atlanta Fed GDPNow tracker is at 3.6% now, and while that figure may moderate a tad more in coming weeks, it is still likely to be well over 2%. Consensus Blue Chip estimates for Q2 are 2.7%.

Now, the Citigroup Economic Surprise Index does show the economic figures increasingly coming in below expectations. And that is supportive of bonds. But Citi says not to get carried away on the predictive ability of its index.

Bottom line: On the whole, the US economy continues to power forward. And there are few signs on the horizon of breaks in that trend. The auto sector is one, but broad-based weaknesses are not apparent.