Employment Data Gathers Strength with Fall in Jobless Claims
October Data Starts with a Positive Note on Employment and Trade
US initial jobless claims at 263,000 for the week ended October 3
Initial jobless claims are one of the important coincident indicators. They provide valuable insight regarding current labor market conditions. According to the US Department of Labor, initial jobless claims stood at 263,000 for the week ended October 3, a decrease of 13,000 from the prior week’s revised level of 276,000. This was better than the consensus estimate of 271,000. With declining jobless claims, business sentiment seems to be improving. Over the past week, the Industrial Select Sector SPDR Fund (XLI) has jumped ~7% as of October 8.
Hiring remains weak with sluggish outlook
A decline in unemployment insurance claim suggests that the number of people depending on the state funds is reducing. However, it does not imply that hiring is increasing in the economy. With a sluggish growth environment, manufacturers seem to be more cautious about new hiring. Manufacturing payroll, down by 9,000 in September 2015, reflects the same.
The industrial stocks of Caterpillar (CAT), 3M (MMM), Deere & Company (DE), and Illinois Tool Works (ITW) have fallen by 21.5%, 9%, 8.6%, and 7.4%, respectively, year-to-date as of October 8.
Recovery is underway with declining claimants
Initial jobless claims have stayed below 300,000 since February this year. A reading below 300,000 states that the economy’s condition may be recovering, as there is no substantial rise in claimants in the recent past. Moreover, initial claims reading below the four-week moving average level of 267,500 suggests that employment data is gathering strength in October.
However, a slowdown in China and other emerging economies is impacting the manufacturers adversely. A strong dollar is adding to the problem as US exports are becoming less competitive in the foreign market. Along with employment, rising consumer sentiment can help the economy rebound. Let’s take a look data from the Bloomberg consumer Comfort Index in the next article.
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