Today’s data suggest downside risk for NFP

The dollar remained under some pressure following the mix of data, where jobless claims were a bit higher than expected, the trade deficit was a bit wider than consensus, productivity was revised a bit higher, and unit labor costs revised slightly lower.

USDIndex remain on close to week lows, at the high 96.00 area. EURUSD is on intra day highs of 1.1368, while USDJPY dipped to 112.69 from near 112.80, while  Equity futures are above lows, but still sharply underwater, while yields remain pressured.

US October trade deficit widened 1.7% to -$55.5 bln, close to expectations, after moving out 1.6% -$54.6 bln in September (revised from -$54.0 bln). The deficit with China widened further to -$43.1 bln from -$40.2 bln, and was -$1.9 bln with Canada from -$1.8 bln. Meanwhile, US Q3 nonfarm productivity was revised up to a 2.3% growth rate versus the 2.2% pace registered in the advance report, and it compares to 3.0% in Q2 and 0.3% in Q1. 

Importantly, the 4k initial claims drop to a still-elevated 231k in the first week of December only slightly trimmed the 10k pop to 235k in the week of Thanksgiving and the 4k rise to 225k in the BLS and Veteran’s Day week. The 4-week claims up-trend that joins November pull-backs in some producer sentiment reports and today’s lean 179k ADP rise to suggest downside risk for our 215k November nonfarm payrollestimate. Claims are well above the prior string of 49-year lows, of 202k in the September BLS survey week, 204k in the week before that, and 205k at the start of September. Claims swings always need to be discounted during the holiday period between Veteran’s Day and the MLK weekend, and we may be seeing a lingering-lift from the double hurricanes and the fires in California. In particular, we saw a 22k NSA claims surge in California claims this week, after a 4k decline last week, a 7k drop before that, and a 4k rise when fire activity escalated, leaving a big net rise in the NSA figures that was back-loaded to this week. Claims are averaging a lofty 227k in November, versus lower prior averages of 214k in October, 207k in September, 211k in August and 215k in July. The 225k November BLS survey week reading sits well above recent readings of 210k in October, 202k in September, 210k in August and 208k in July.