The number of Americans filing for unemployment benefits rose more than expected last week with 227,000 applications for the week ended June 22, according to the Labor Department.
Key Takeaways
- The Labor Department reported on Thursday that unemployment benefits applications rose to 227,000 vs. 220,000 expected.
- The current data does not point to a major increase in layoffs on the horizon at this time, but economic conditions are undeniably worsening.
- Data for the previous week was revised upward by 1,000, and claims for California and Mississippi were estimated.
The four-week moving average of claims, a less-volatile metric of layoffs, rose by 2,250 to 221,250 last week. Continuing claims after an initial week of aid rose by 22,000 to 1.69 million for the week ended June 15, and the four-week moving average of these claims rose by 6,500 to 1.69 million.
Claims could be set to increase even more in coming weeks due to the impending shutdown of auto manufacturing facilities for routine summer maintenance. Plant closures tend to be implemented at different times throughout the summer months, often acting as a variable in the government data model which can be difficult to work around.
For the first time since January, initial jobless claims (227k filed in the June 21 week) were more than one standard deviation above their 15-week average. There is still no trend evident but we will be watching for outliers of more than two standard deviations away (i.e., 237k) pic.twitter.com/l54mpRfg1x
— Jeoff Hall (@JeoffHall) June 27, 2019
Trade War Worries
The true concern regarding layoffs is not the routine shutdown of auto plants, but unexpected layoffs as a result of the trade war still raging between China and the US. The US now has until next week to decide whether it will comply with Chinese demands to remove recent tariffs and hold off on tariffs for the next $300 billion worth of goods among other items – failure to do so will result in another escalation of the conflict and undoubtedly harm US businesses of all sizes.
Last week, the US central bank signaled that interest rate cuts may be on the horizon as early as July due to the uncertainty surrounding the trade war as well as low inflation pressure. Though still on track to enter a record period of expansion, the economy is now undergoing a general slowdown.
Manufacturing has been struggling due to the trade war, the housing sector has been exhibiting poor performance, the trade deficit is widening, and consumer confidence shows is waning. The Atlanta Federal Reserve is maintaining its Q2 GDP forecast at just 1.9% compared to 3.1% in Q1.
Market Reaction
Gold prices have ticked downward today despite the increase in layoffs as well as a report indicating that Q1 GDP was revised slightly downward. The price of spot gold is down 0.57% and trading at $1,403.5/oz with a high of $1,413.31/oz and a low of $1,400.71/oz. It remains to be seen whether gold has truly found support at $1,400 or whether it will sink lower throughout the day.
