US: Claims surge higher, factory orders plunge

nitial claims unexpectedly rose by 35 000 to 626 000 in the most recent week, the highest level in the cycle and the highest since October 1982. The steep rise is probably due to massive shutdowns at carmakers plants. The continuing claims increased by a more modest 20 000 to 4 788 000, which is the highest level ever (series started in 1967). The figures clearly show that the current recession is at best as severe as the 1981/82 recession.
The monthly retail sales fell in January for the fourth consecutive month, notably by 0.7% Y/Y, a weak result but nevertheless stronger than the ICSC forecast of a decline of 2 to 3%. Only Wal-Mart posted positive sales figures; all other retailers reported steep declines.
December factory orders printed very weak, down 3.9% M/M following a downwardly revised drop of 6.5% in the previous month. Consensus was looking for a more modest 3.1% M/M decline. On a yearly basis, orders are down a stunning 18.7%, suggesting just like in Germany that industrial activity collapsed in Q4. Looking to the details, part of the decline (non-durable orders) was due to the plunge of the prices of refined petroleum goods.
Q4 productivity increase by 3.2% ann., following a 1.5 rise in Q3 and was up 2.7% Y/Y. This is an extraordinary result given the plunge in output. Indeed, while business output dropped 5.5% in Q4, the aggregate hours worked (private sector) fell a whopping 8.4% (annualized). The combination of the productivity growth (3.2%) and the rise in compensation (5%) led to a moderate rise of 1.8% of unit labour costs in Q4 in annualized terms and a very subdued 0.7% Y/Y. This means that there are absolutely no wage-related inflationary pressures.