Woo Street's  Instablog

The Department of Labor Statistics reported seasonally adjusted initial claims came in 10,000 lower from the prior week to 390,000. The 4-week moving average decreased to 400,000.    The labor market, for the past couple of months, has shown a trend of super slow, yet consistent improvement. Insured unemployment rate remained unchanged at 2.9%. 

The U.S. trade deficit contracted from $44.9 billion to $43.1 billion in September. The driver was increased exports as they totaled $180.4 billion (up from $177.9 billion). Imports also increased to $223.5 billion. Industrial supplies, consumer goods, autos, and capital goods exports all increased. The stronger than expected exports will likely lead to stronger Q3 GDP numbers and momentum for Q4.

On the other side of the pond, China reported slowing export growth. Their exports decreased to 15.9% in October from 17.1% in September. I think this is fairly consistent with the world economy. Europe and the U.S. are dealing with sovereign debt crises. Debtor nations don’t have the capacity to consume like they did in the past and will gradually cut back. 

President Obama meets with Chinese President Hu Jintao this weekend and will likely talk about the exchange rate between China and the USD. Given China is an export driven economy and its exports are slowing, I doubt President Jintao will concede and let the Yuan appreciate. If China let the Yuan appreciate, exports would be more expensive to foreign (U.S.) consumers and decrease demand. This would further hurt China and its economy during a time when some economists are calling for a hard landing. Also going against President Obama is the fact China’s inflation rate cooled slightly to 5.5%. One of the U.S.’s arguments is that by keeping the Yuan pegged to the USD, China cannot control inflation because the U.S. keeps printing money. This is true, but I think the Chinese government would rather deal with inflation problems than a collapse in exports.