Initial applications for unemployment benefits in the US dropped last week along with the four-week moving average for such claims, indicating strong activity in the tight labor market.
Key Takeaways
- After hitting a near-49 year low last week, initial jobless claims rose slightly by 8,000 applications to a seasonally adjusted rate of 214,000 for the week ended December 15.
- With fewer unemployment benefits claims than expected, the data is being viewed as positive for the strength of the economy and labor market.
- The data suggested underlying strength in the labor market and broader economy.
Claims had dropped to 206,000 in the week before last, not far off the 49-year low of 202,000 reached in mid-September. Expectations were for claims to increase to 216,000 last week.
Rate hikes were raised on Wednesday for the fourth time this year as expected, with fewer increases on the cards for next year according to most analysts. The Federal Reserve has signaled that its tightening cycle is drawing to a close with global market uncertainty and slowing economic growth worldwide due to factors such as Brexit and the ongoing trade war between the US and China.
Jobless claims have been volatile in recent weeks, perhaps due to an early Thanksgiving holiday which resulted in seasonal layoffs coming early and countering the efficacy of the model used to adjust for the holiday season.
Labor Market Going Strong
The less-volatile four-week moving average shows a drop of 2,750 applications to a total of 222,000. While an increase for the week ending November 24 raised concerns of an economic slowdown, the latest data is more positive.
The November slowdown has been attributed to a lack of skilled workers as opposed to a lack of available jobs on offer, and the unemployment rate is near record lows at 3.7% and not far off the Fed target of 3.5% for next year.
The number of people receiving benefits after an initial week of aid increased 27,000 for the week ended December 8 to a total of 1.69 million, and the four-week moving average of these continuing claims rose 6,750 to 1.67 million.
8:46 AM : Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, was reported at 214,000 for last week. This represents an increase of 8,000 from the previous report of 206,000 Claims.
— Atlantic Home Mortgage (@AtlanticHM) December 20, 2018
Expert Outlook
The U.S. central bank said “the labor market has continued to strengthen,” and described job gains as having been “strong, on average, in recent months.”
The recent reports of the jobs market counter initial fears last month that things were slowing down in both the labor market and the US economy as a whole.
Market Reaction
With a weakening trend in the value of the US dollar, gold has held gains from yesterday following the Labor Department report.
Gold last traded at $1,256.55/oz, up 0.36% and near its daily high of $1,261.64/oz with a low of $1,241.92/oz.