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The number of Americans who applied for unemployment benefits last week rose slightly from 203,000 to 205,000 vs. 210,000 expected. Claims remain relatively low, with no indication of major layoffs in the labor market, according to the latest data from the Labor Department.

Key Takeaways

• Jobless claims rose 2,000 to 205,000 vs. 210,000 expected in the week ended February 08.
• The data indicates ongoing strength in the labor market as the economy continues to expand moderately.
• The less-volatile four-week average of claims saw no change at 212,000 for the month ended February 08.

After hitting a 50-year low of 193,000 last April, initial jobless claims have remained in the low 200,000s, pointing to a stable labor market with no widespread layoffs.  The monthly average of claims last week remained unchanged at 212,000, and continuing claims dropped. The number of people receiving benefits after an initial week of aid fell 61,000 to 1.69 million. The four-week average of these claims fell 17,500 to 1.73 million.

The economy created 225,000 jobs in January after gaining 147,000 positions the month before. Unemployment rose one-tenth of a percentage point to 3.6%, and the level of labor force participation also grew. While January hiring was particularly strong, this was likely due to unseasonably mild weather which provided favorable conditions for construction, leisure, and hospitality workers. Overall, hiring has been slow in the last 12 months compared to the year before. On Tuesday, a government report showed US job openings have fallen to a 2-year low.

For a second straight week and for the third time in the last five weeks, initial jobless claims printed more than one standard deviation below their trailing 13-week average. pic.twitter.com/EkRlgOEJTW

— Jeoff Hall (@JeoffHall) February 13, 2020

For now, the labor market remains in good health, sustaining the consumer spending that accounts for two-thirds of US economic activity. The US economy has been expanding for a record-breaking 11 year period, and this is expected to continue moderately throughout 2020. The trade war with China has deescalated significantly in recent months with the signing of a partial trade agreement with China, alleviating some of the concerns surrounding manufacturing and business investment.

However, Federal Reserve Chairman Jerome Powell pointed out this week that the Chinese coronavirus outbreak poses a threat to economic activity. The virus has now claimed over 1,300 lives and spread to several countries, leading to reduced growth estimates for the Chinese economy. The markets are also concerned that the outbreak may impact the tentative trade agreement between the US and China.

Market Reaction

Gold prices held overnight gains and spot gold last traded at $1,572.73/oz, up 0.34% with a high of  $1,576.73/oz and a low of $1,565.01/oz. Despite jobless claims coming in below expectations and muted inflation pressures reported at the same time, the market has seen increased risk-off sentiment in the last 24 hours. This is likely due to concerns surrounding the potential impact of the coronavirus on the US and international economies, with the reported number of infected rising by over 30% on Wednesday and several hundred more deaths reported.