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US unemployment benefits claims fell last week to the lowest level since 1969, indicating that the labor market remains highly robust in the face of economic uncertainty in other sectors along with the issues caused by the partial shutdown of the US government.

Key Takeaways

• Jobless claims declined 13,000 to 199,000 for the week ending January 19, disproving economic forecasts for an increase.
• The less-volatile four-week average dipped to 215,000, the lowest level since early November.
• Initial filings of federal employees, which are reported a week later than other claims, increased by 15,000 to 25,419 (unadjusted) for the week ending January 12.
• The drop may have overstated the health of the labor market due to the shutdown.

The previous week’s claims were revised down to 212,000 from 213,000. The claim increase from federal workers comes amid the third week of the shutdown leaving hundreds of thousands of workers without pay.

Analysts have pointed out that the shutdown may not be fully reflected in the most recent report due to the disruptive effect it has on data gathering, with certain branches of government responsible for reporting relevant data currently shut down.

Due to Monday’s Martin Luther King holiday, initial claims had estimated in California, Virginia, Hawaii, Kansas, North Dakota, and West Virginia last week. This may have impacted the accuracy of the overall report as California is the most populous state and Virginia has a high density of federal workers.

Continuing claims, which are reported with a one week delay, fell by 24,000 to 1.713 million in the week ended January 12. The unemployment rate among those eligible for benefits saw no change, holding at 1.2% for the seventh week in a row.

Breaking News
Initial Jobless Claims At Lowest Level Since Nov 15, 1969
This is remarkable for a country in chaos and crushing impacts of trade war. Note: It can get even better. pic.twitter.com/ApDc8NTTji

— Charles V Payne (@cvpayne) January 24, 2019

Shutdown Continues

Around one-quarter of federal agencies have been closed down since late December, affecting 800,000 government employees working without pay or furloughed. Many government contractors are also working without pay – workers will be back paid upon resolution of the shutdown.

Economists expect the shutdown to push the unemployment rate above 4% before the month is out seeing as the furloughed workers will be counted among the unemployed.

The rate already rose from 3.7% to 3.9% in December, although it is believed that this is due to more people entering the workforce rather than a shortage of jobs – on the contrary, reports indicate that there is a shortage of skilled workers compared to the number of available open positions in the US labor market.

Discounting the shutdown, the slight increase in continuing claims suggests little change in the rate of unemployment for January.

Expert Outlook

Randy Frederick, Vice President of Trading and Derivatives at the Schwab Center for Financial Research, stated that there was “still no visible impact in weekly jobless claims due to the government shutdown. In fact, at just 199k, initial claims were not only way below the 218k estimate, this is the lowest single week since 11/15/69.”

Market Reaction

The strong labor market data has likely contributed to the dip in gold prices today with gold prices sinking near session lows following the report.

Spot gold last traded at $1,282.63/oz, down -0.04% with a high of $1,284.72/oz and a low of $1,277.44/oz.