Claims Will Tell

Tomorrow morning at 8:30 a.m. EST, the Bureau of Labor Statistics will release initial unemployment claims for the August 3 week and continuing claims for the prior week. We believe that both were boosted by Hurricane Beryl in Texas during July. So we expect to see both decline tomorrow. If we are right, that should help to relieve fears that an employment-led recession is underway. If we are wrong, there could be more chatter about the need for a Fed emergency rate cut or a bigger cut in September.

Recession fears might have been heightened by June's consumer credit report which came out today following the stock market's close. Revolving credit fell $1.7 billion m/m, well below the 12-month average monthly increase of $6.5 billion (chart). In addition, many consumer-related companies did mention in their recent Q2 earnings conference calls that consumer spending might be slowing.