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Initial jobless claims dipped well below the market consensus expectation of 230,000 at just 216,000, indicating that the labor market may be regaining its footing somewhat following the 12-month high in jobless claims seen last week. However, the four-week average is at a yearly high. The recent surge was possibly influenced by the partial shutdown of the US government which was the longest in history.

Key Takeaways

• The number of Americans filing for unemployment benefits last week dipped from 239,000 to 216,000 vs 230,000 expected.
• The four-week moving average is at a yearly high, indicating that the labor market, while healthy, may be slowing down from what some have described as unsustainable growth.
• The recent drop may have been over exaggerated as a national holiday resulted in the Labor Department estimating the figures for certain states.

While claims have dropped on a weekly basis, the less-volatile four-week moving average is at its highest level since January 2018 with a reading of 235,750, up 4,000 from the previous reading. The four-week moving average is a better indicator of the underlying trend in the labor market, although it remains to be seen to what extent the market is still suffering from the effects of the partial US government shutdown which lasted 35 days, the longest in history.

The US government stated that furloughed federal employees would have no impact on unemployment data, but this does not take into account private government contractors who worked without pay and likely filed for jobless benefits during the shutdown, potentially inflating the figures.

The Labor Department had to estimate the initial jobless claims data for Puerto Rico, Virginia, Hawaii, and California, the most populated state in the country, due to Monday’s President’s Day Holiday. This may have caused the drop in claims to be over-exaggerated, something which will be clearer with next week’s figures.

Initial jobless claims fell to 216K last week, but 4-week average inches higher. Have we seen the bottom in initial jobless claims? pic.twitter.com/2ohhIxVX4z

— jeroen blokland (@jsblokland) February 21, 2019

Weakening Labor Market Trends?

The claims data covered the survey week for nonfarm payrolls, the average of which saw an increase of 15,250 between January and February, which indicates a slowdown in job growth. The four-week moving average of initial jobless claims hitting a yearly high is also cause for concern.

That said, payrolls increased by 304,000 jobs in January, the most in 11 months, after increasing by just 222,000 in December. The claims report showed that the number of people receiving continuing claims (benefits following an initial week of aid) dropped by 55,000 to 1.73 million for the week ended February 09. However, the four0week moving average rose by 2,750 to 1.75 million.

Expert Outlook

Chief economist of RSM US LLP Joseph Brusuelas stated that “seasonal noise” may be continuing to impact the labor data – businesses see a much higher rate of staff turnover during the holiday season due to the hiring and release of temporary workers needed to meet heightened consumer demand over the holidays. Brusuelas said that analysts “will not get a good look at the underlying trend until early March. Right now, our preferred metric the 13 week moving average stands at 224K in contrast with topline at 216K.”

Market Reaction

The price of gold has taken a hit today after posting significant gains over the last few days, and this recent decline may have been partially influenced by today’s initial jobless claims report. Spot gold last traded at $1,333.01/oz with a daily high of $1,345.28/oz and a low of $1,332.72/oz.