"The claims data are flashing a much stronger signal that other data such as payrolls. Companies are lean and mean, but the hiring that usually goes along with claims like these just isn't happening."
- Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc.
While the latest White House meeting failed to break the budget logjam, and the widely-discussed government shutdown entered its third day, the economy continued to send mixed data, bolstering the case it is too early to speak about tapering of the Fed's stimulus. A weekly report showed the number of initial jobless claims inched up 1,000, reaching 308,000; however, still beating analysts' expectations of a 315,000 reading and hovering around a six-year low. Also Thursday, the Institute for Supply Management said a gauge of activity in the services sector, or the so-called non-manufacturing index, eased to 54.4 in September, down from August' 58.6, posting the biggest decrease since November 2008.
In theory, a drop in the unemployment claims would lead to acceleration in payrolls, while the accommodative monetary policy, strong housing market and rising household wealth are all sending bright prospects for the economy. However, any type of disruption in government's work would negatively affect government spending, consumers' mood and financial markets. According to Fed official Eric Rosenberg, the QE should not be withdrawn until 2016. Until markets have a clear date on when Fed can possibly begin tapering its QE, the growing uncertainty is likely to have a collateral impact on the whole economy.
© Dukascopy Bank SA