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While the number of Americans applying for jobless benefits dropped last week, the drop was lower than anticipated. The four-week high in the moving average rose to its highest since April and the ADP report on new jobs shows a decline in growth, all of which suggests a slowdown in the tight labor market.

Key Takeaways

• Initial claims for state unemployment benefits saw a decrease of 4,000 applications, bringing the total to a seasonally adjusted 231,000 for the week ending December 01.
• The data from the prior week was revised to show 1,000 more applications for benefits than first estimated.
• Economists had forecast claims falling to 225,000, significantly lower than the figure now reported.

Claims had risen for three straight weeks last weeks, even nearing the 8-month high of 235,000 during the late November.

The cost of laboring in Q3 rebounded less than expected while it dropped more than previously estimated the period prior, all of which points to a mild increase in wage inflation.

It’s possible that the Thanksgiving and other major national holidays or events could have impacted recent data,  but the data is also supported by the four-week moving average of jobless claims. The four-week average shows the highest number of claims since April and is often taken as a more reliable and less volatile measure.

Financial markets could also have played a role in recent volatility with the $1.5 trillion tax cut making some data difficult to adjust for. While wage growth has increased, wage inflation also seems likely.

Continuing claims (the number of people receiving benefits after an initial week of aid) dropped by 74,000 to 1.63 million for the week ending November 24, with the four-week average showing an increase of 250 claims to 1.67 million.

The increase in hourly compensation was revised down for Q3 to a rate of 3.1% compared to the 3.5% reported last month, but the data is nevertheless indicative of strong growth in the jobs market with the unemployment rate holding at a 49-year low. November’s employment report will be made available by the Labor Department on Friday.

Expert Outlook

Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said:
“Some of the rise could reflect seasonal adjustment challenges relating to holidays and colder-than-usual weather, but some loss of momentum in what has been a strong labor market is also plausible.

Amherst Pierpont Securities chief economist Stephen Stanley said:
“I continue to believe that the bulk of the rise in the number of new filers in recent weeks reflects seasonal noise rather than a fundamental pickup in layoffs,” said chief economist

Market Reaction

Gold is currently up 0.02% and trading at $1,237.34 with the healthy gains likely a result of some market fear surrounding the potentially negative trends in the employment data. While the jobs market is strong, recent growth may prove unsustainable with multiple indications that things are slowing down, initial jobless claim figures among them.