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The number of Americans filing applications for unemployment benefits unexpectedly remained at a 5-month high last week, leading to concerns of softening in the labor market. It was believed that estimating certain states due to Veteran’s Day may have impacted the results for the week before, but the latest report shows that this may not be the case.

Key Takeaways

• Initial claims stayed flat at 227,000 for the week ended November 16, the highest level since June 22.
• Claims for the week before were revised upward by 2,000.
• Claims were forecast to drop to 219,000 last week.

Despite no states being estimated last week, claims remained at a 5-month high of 227,000 vs. 219,000 expected according to Thursday’s Labor Department report. The four-week average of initial claims, a more stable measure which iron out weekly volatility, rose by 3.500 claims to 221,000 last week.  The number of people receiving benefits after an initial week of aid rose 3,000 to 1.70 million for the week ended Nov. 9. The monthly average of these continuing claims rose 3,000 to 1.69 million.

The data could indicate a softening in the labor market, which some analysts have been expecting given the worsening national and global economic conditions. The labor market has been key driving force of the US economy of late, with unemployment at the lowest rate in nearly 50 years. While the ongoing trade war has dragged down GDP, the labor market has been supporting robust consumer spending which accounts for the largest portion of the US economy. Any major increase in jobless claims will likely be viewed as a recessionary indicator.

Two weeks of jobless claims at 227k. “We have to go back to late April, early May the last time we’ve seen 2 weeks that have averaged more. Next week’s number thus becomes an extremely important read to see if we make it 3 weeks in a row.” @pboockvar pic.twitter.com/TFisQqa9s1

— Carl Quintanilla (@carlquintanilla) November 21, 2019

Government Input

The latest report spanned the week that the US government conducted its nonfarm payrolls component of the November employment report, and the monthly average of claims rose by 5,250 between the October and November survey weeks. While this indicates that hiring will continue to slow down this month, it is expected that employment will still see a boost due to the end of the General Motors strike which saw 46,000 workers participate, and impacted up to 128,000 jobs in October due to its influence on local supply chains.

Job growth in 2019 has slowed considerably to an average of 167,000 new jobs per month vs. 223,00 jobs per month in 2018. The ongoing trade war is partly to blame for the slowdown. While the labor market may be nearing capacity, yesterday’s publication of a recent Federal Reserve policy meeting showed that Fed policymakers consider the labor market to be in a strong position for the time being. The slowdown was attributed partially to a shortage in skilled workers as well as a cooling in labor demand.

Market Reaction

Gold prices have ticked downward today despite the tentative news of a softening labor market. Spot gold last traded at $1,468.77/oz, down -0.31%with a high of $1,475.75/oz and a low of $1,466.80/oz. Recent reports of a possible deal agreement between the US and China regarding the ongoing trade war may be contributing to downward momentum in the precious metals markets today.