U.S. jobless claims rise for third straight week, labor market conditions likely to weaken modestly in future

Jobless claims in the U.S. rose again. In the week ended 24 November, the initial jobless claims rose by 10k to 234k, as compared with the consensus expectations of a modest decline to 220k. The increased pushed the four-week moving average in initial claims increased by 4k to 223k. Continuing claims rose by 50k in the week ended 17 November to 1.710 million, and the four-week moving average in initial claims rose higher to 1.668 million, from 1.648 million in the week prior. The insured jobless rate remained stable at 1.2 percent.

This is the third straight week of higher initial jobless claims. It seems that the pace of separation in labor markets has moved modestly higher. This is necessarily a surprise for three reasons, noted Barclays in a research report. Firstly, financial market stress has picked up recently from very low levels. Increases in volatility and spreads often show periods of increased information asymmetry and uncertainty that often weigh on investment spending and hiring decisions.

Secondly, the individual state-level data imply a rise in initial claims in states that have export ties to China. States such as California, New York and most of the industrial Midwest have high export linkages to China, and some of the rise in initial claims might be coming from the impact of protectionism, actual or expected.

Thirdly, employment gains this year might be temporarily boosted by fiscal stimulus and the need to increase output to meet increased demand. Initial claims data dropped from an average of 245k in the second half of 2017 to 211k in the third quarter 2018.

“Since we believe the peak impulse from fiscal stimulus on growth in economic activity occurred in Q2 and Q3 of this year, we would expect some modest weakening in future labor market conditions as the pace of hiring slows modestly”, stated Barclays.

This might also correspond with a return of the pace of job separation to pre-stimulus levels. However, the recent trends in initial and continuing claims as hinting that labor markets have lost momentum.

“Instead, we view the moderation as consistent with the recent increase in financial market stress and the ebbing in fiscal stimulus; gains in employment in the coming months should still be well above levels needed to keep the unemployment rate steady”, added Barclays.

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 44.8952. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex