US Unemployment Claims Under 300K for 83rd Week

There was a surprising drop in the number of Americans filing for unemployment benefits last week as the figures almost reached a 43 year low, this implied a sense of stability in the US labor market which might lead to a higher chance of an interest rate hike by the Federal Reserve before the end of 2016. The Labor Department on Thursday stated that in terms of seasonal adjustments the initial claims for state unemployment benefits fell by 5,000. Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 257,000 in the latest week. First-time claims were the lowest since April, when initial applications for aid were at levels not seen since November 1973.

According to Bloomberg, economists had earlier forecasted a rise to 256,000 in last week’s claims from 254,000 recorded the week before. Because it's a weekly data series, it tends to be volatile and subject to revision. But the claims report is one of the timeliest ways to gauge how the labor market is doing, and usually gives an early warning when things are going south. But right now, claims tell us that the labor market is solid. The weekly print has not risen above 300,000 for 83 straight weeks, the longest streak since 1970. Bloomberg also implied that, the claims numbers come ahead of the September jobs report on Friday, which is projected to reveal that the US economy added 172,000 to its nonfarm payrolls.

Watching the week-to-week volatility, the 4-week moving average fell by 2,500 to 253,500 from last week’s unrevised average of 256,000. Individuals continuing to receive unemployment benefits as of the week ending September 24 fell by 6,000 to 2.058 million from the prior week’s upwardly revised level of 2.064 million (from 2.062 million). Tomorrow, the US jobs report is due out at 12:30 GMT time. Analysts are looking for a non-farm payrolls figure of 172,000, with the unemployment rate to remain unchanged at 4.9%.

This reading marked the 83rd consecutive week in which unemployment claims have remained below 300,000, and is seen as a significant show of strength in the labor market. The robust reading comes a day before the release of the closely watched September jobs report. Economists polled by Reuters forecast nonfarm payrolls increasing by 175,000. The unemployment rate is seen holding steady at 4.9%. Jobs growth has been slowing but is still well above the threshold needed to absorb new entrants into the labor market.

The ICE US Dollar Index is trading higher to 96.46, up by 35 bps. The S&P 500 futures are lower by 4 points to 2,149.25. Gold is trading off by 89 bps on the session to $1,257.4 per ounce, while WTI crude oil futures are edging higher by 68 bps to $50.16.