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The Labor Department reported a slight increase in the number of Americans filing applications for unemployment benefits, indicating ongoing strength in the market. Initial jobless claims rose 3,000 to 213,000 for the week ended September 21 according to a report released on Thursday, while data for the week prior was revised upward by 2,000 applications.

Key Takeaways

• Jobless claims rose by 3,000 to 213,000, relatively in line with market expectations of 212,000 applications.
• Applications for the week prior were revised 2,000 higher than the previously reported figure.
• With initial jobless claims still in a low range, the labor market appears to be stable with no reports of major layoffs so far.

The labor market continues to show ongoing strength during times of economic uncertainty, with the moderate increase seen in initial jobless claims last week in line with expectations. The only state in which claims were estimated last week was Puerto Rico.

The four-week moving average of initial jobless claims, a more stable indicator of market trends which mitigates volatility, dropped 750 last week to 212,000 last week, indicating stability overall. The number of Americans receiving benefits after an initial week of aid dropped 15,000 to 1.65 million for the week ended September 14, the lowest since October 2018. The monthly average of these continuing claims dropped 12,750 to 1.67 million.

The continuing claims data was gathered during the same week that households were surveyed for the September unemployment rate, and indicates that the four-week average of claims dropped 32,500 between the August and September survey periods. This may indicate an even lower rate of unemployment, which is currently at a near-historic low of 3.7%. However, it’s possible that the number of claims will increase temporarily in the next week’s report as the effects of the GM Motors worker’s strike begin to make themselves known.

First Cut: Initial jobless claims rise slightly in September 21 week. Look for the level to start to rise next week as the strike by UAW workers at GM starts to have ripple effects on suppliers for the auto industry. https://t.co/MYqOu597JZ pic.twitter.com/AXLxniXV5x

— Whetstone Analysis LLC (@AnalysisLlc) September 26, 2019

Employment and the Trade War

130,000 jobs were created in August, down from the month before and well below the yearly average so far of 158,000. The number of jobs created in August is not far off the minimum 100,000 required to keep pace with growth in the working age population, leading to concerns among analysts that the labor market may have troubled waters ahead. However, it is unclear whether the hiring slowdown is due to reduced demand for labor, or the ongoing shortage of skilled workers which has already resulted in a tighter labor market.

Hiring has also slowed considerably in 2019 compared to the year before which saw 223,000 jobs created per month. The labor market has since tightened, but continues to show strong activity so far in the face of trade tensions which have had a negative impact on manufacturing and business investment. As the trade conflict escalates between the US and China, the possibility of new tariffs on goods from each nation increases, putting pressure on industries like manufacturing which rely to an extent on Chinese goods, and creating an uncertain environment for potential business investors.

However, despite the effects of the conflict, initial jobless claims, a key measure of layoffs, have remained low. It could be the case that many industries are unwilling to terminate staff positions now in case rehiring proves to be too difficult or expensive later on in the tightening labor market.

Market Reaction

Gold is hovering near daily highs and remains above the crucial line of psychological support at $1,500. Spot gold last traded at $1,511.70/oz, up 0.47%. Gold prices may have come under some selling pressure from the release of the third and final reading of the US GDP for Q2 2019 which indicates that the economy expanded 2% between April and June, in line with market expectations.

“Downward revisions to personal consumption expenditures (PCE) and nonresidential fixed investment were primarily offset by upward revisions to state and local government spending and exports,” the report said.