Jobless Claims Fall More Than Predicted, GDP Soars 2% In Q1: Dollar Rebounds As Powell Sticks To Hawkish Tone

New economic data, released on Thursday, point to continued labor strength and stronger-than-expected economic growth last quarter.

Weekly unemployment benefits fell more than expected, from 265,000 to 239,000, well below the consensus figure of 265,000 and indicating a persistent trend of resilience in the US labor market.

Simultaneously, the final estimate of annual real GDP growth for the first quarter came in at 2%, which was above the 1.3% seen in the second estimate and the 1.4% expected by economists. The final reading for core personal consumption expenditure (PCE) prices was 4.9% in Q1 of 2023, somewhat lower than 5% in the second estimate.

Dollar And Treasury Yields Rise

The U.S. dollar, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, trended higher, with the U.S. dollar index jumping to 0.2%, and reaching the highest levels in two weeks.

Fed Chair Jerome Powell reinforced hawkish tones at the Banco de España Conference on Financial Stability on Thursday, stating that the majority of the board sees two or more rate hikes by year-end and that the process of getting inflation to 2% has a long way to go.

Read now: Powell Leads Global Central Bankers’ Consensus On Inflation: More Rate Hikes Needed

Treasury yields skyrocketed, with the 2-year yield rising to 4.83%, up by 13 basis points, and the 10-year yield rising to 3.80%, up by 9 basis points. Traders currently assign an 82% chance of a Fed 25-basis-point rate hike in July.

Futures on the Nasdaq 100 Index flipped to the red ahead of Wall Street opening bells.

Chart: USD and 2-year Treasury Yields Jump After Thursday’s Data Releases

Highlights From Last Week’s US Unemployment Claims

• Initial jobless claims came in at 239,000 for the week ended June 24, much lower than the both the expected and previous week’s readings of 265,000.
• The four-week moving average for jobless claims, which eliminates week-to-week variability, rose from 256,000 to 257,500, above the expected 251,270. 
• Continuing jobless claims for the week ended June 17 fell from 1,759,000 to 1,742,000, below than the forecasted 1,765,000.
• Notable increases in jobless claims were reported in California, up 44,239, Texas, up 19,289, and Ohio, up 18,316.

Final Q1 GDP Growth Tops Prior Estimates

• The U.S. real GDP increased at an annual rate of 2% in the first quarter of 2023, according to the final reading, higher than the 1.4% estimated earlier.
• The advance in real GDP in the first quarter reflected increases in consumer spending, exports, government spending, and nonresidential fixed investment that were partly offset by losses in private inventory investment and residential fixed investment.
• The PCE price index rose 4.1%, revised down by 0.1% from the second estimate.
• The core PCE price index rose 4.9%, revised down by 0.1%.

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