235,000 people opened new claims for jobless benefits in the week ended January 26, reaching a 16-month high which seems to run contrary to what was almost 49-year low of the week before. However, the increase is likely temporary and influenced by holiday season nuances as well as the partial government shutdown.
Key Takeaways
- The sudden increase in initial jobless claims is well over market expectations of just 210,000.
- Jobless claims the week before were revised upward to 200,000 from the initial figure of 199,000 which was reported as the lowest reading since 1969.
- The more reliable four-week moving average of initial jobless claims posted a more moderate increase of 5,000, ten times less than the weekly increase.
- The number of people already collecting unemployment benefits, known as continuing claims, rose by 69,000 to 1.78 million.
It is thought that the most recent report is the product of seasonal quirks which have occurred in the past around Thanksgiving through to Martin Luther King day in late January. Sudden changes of this magnitude (50,000 claims) are usually anomalous and temporary.
The government tends to adjust weekly figures for seasonal variations, but the estimates are not always accurate. It’s also possible that the government shutdown had a mild effect on the accuracy of the figures, although very few of the affected workers will have applied for jobless benefits.
Federal workers apply for benefits through a separate program, but furloughed private contractors could have contributed to the reading. Areas like Virginia, Maryland, and Washington D.C. which have high densities of federal workers saw little change in weekly claims throughout January.
Labor Market Remains Strong
Nearly 15,000 government employees did seek benefits the week before the shutdown ended, making a total fof 55,000 throughout the shutdown – they will have to pay back any benefits received.
These separate federal claims are expected to decline rapidly now that the shutdown has ended, and the rate of standard initial jobless claims is also expected to drop sharply over the coming weeks with the labor market doing very well by all other measures.
Companies are hiring rapidly, unemployment and layoffs are at around a 50-year low, and wages have increased the most in 11 years comparing Q4 2018 to Q4 2017.
Yesterday’s ADP report showed that 213,000 private sector jobs were created in January with growth in nearly all sectors.
Massive miss on initial jobless claims (253k vs. 215k eyed and 199k last week) - may be a delayed reaction to the government shutdown...
— Matt Weller CFA, CMT (@MWellerFX) January 31, 2019
Market Reaction
Gold is holding major gains today although has ticked downward slightly following the news that employment costs and wages have risen to an 11-year high in Q4 year-over-year.
Gold last traded at $1,323.94/oz and is up 1.07% with a session high of $1,326.10/oz and a low of $1,309.55/oz.
Gold Price Chart
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