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Initial jobless claims were lower than expected with a total of 216,000 claims compared to a forecast 225,000, pointing to a healthy labor market in the face of economic uncertainty in other sectors.

Key Takeaways

• Initial jobless claims came in lower than predicted last week with the number of Americans applying for unemployment benefits below market expectations.
• Claims dropped 17,000 to 216,000 for the week ending January 05 according to the Labor Department.
• The data indicates a strengthening labor market which could help alleviate concerns of an economic slowdown amid weak reports in other sectors.

Claims were revised upwards for the week prior by 2,000, making last week’s drop even more pronounced. The Labor Department stated that only claims for Puerto Rico were estimated last week which skewed expectations and estimates.

The four-week moving average, a less-volatile measure of labor market trends, showed an increase of 2,500 to 221,750 claims last week.

The number of continuing claims of people already receiving benefits fell 28,000 to 1.72 million for the week ended December 29. The four-week moving average increased 15,250 to also show a result of 1.71 million.

US jobless claims. Not much to say. The 4-week average claims, which smoothes out some of the volatility, is up from 219k to 221k (still below the highest level reached in 2018). Initial jobless claims at 225k (but this data tends to be noisy during the holiday season). pic.twitter.com/8ywm05XKhO

— Christopher Nicolas Dembik (@Dembik_Chris) January 10, 2019

Government Shutdown

The government shutdown increased claims for the week ending December 29 as workers furloughed and applied for benefits. US President Donald Trump has demanded $5.7 billion from Congress to build a wall on the nation’s southern border, prompting a shutdown which has affected a quarter of the US government including the Commerce Department.

800,000 employees so far have furloughed or continued working without pay, not including private contractors working for government agencies also working out-of-pocket.

Federal worker claims are reported separately and one week after non-federal claims, impacting data analysis of the situation. The number of federal employees applying for benefits jumped 3,831 to 4,760 in the week ending December 29.

Job Creation Surging

312,000 jobs were created in December, a 10-month high. The unemployment rate actually increased marginally in the same time period, but this has been attributed to many new workers entering the workforce with the labor market reportedly having more open positions than skilled workers of late.

The labor market is leading the way in the US economy with other sectors such as housing, consumer confidence, and manufacturing activity showing decline. The housing market very recently showed signs of life with a 23.5% increase in mortgage applications due to lower interest rates. The Federal Reserve chairman Jerome Powell has indicated that the Fed will be taking a cautious and flexible approach to interest rates in the light of domestic and global economic uncertainty.

Expert Outlook

Richmond Fed president Tom Barkin remarked in a speech in Raleigh that the future growth of the labor force may depend on people currently on the sidelines, stating that policies to support women’s labor force participation, workforce development, and legal immigration could play a key role in the labor market in the near future, adding that business underinvestment and declining startup rates were contributing to productivity slowdowns and forecasting “somewhat slower” growth in 2019 compared to the year before.

Market Reaction

Gold has been relatively unaffected by the news, although has ticked slightly downward from earlier gains following the release of the strong labor market data.

Spot gold last traded at $1,290.17/oz with an increase of 0.07%, a high of $1,297.10/oz and a low of $1,289.65/oz.