US Markets
Thursday, January 18th, 2024 4:16 pm EDT
Key Points
Surprising Resilience in Labor Market:
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- Initial jobless claims for the week ending January 13 unexpectedly dropped to 187,000, marking the lowest level since September 24, 2022. This represented a notable decline of 16,000 from the previous week and was below the Dow Jones estimate of 208,000. The surprising resiliency in the labor market was evident despite attempts by the Federal Reserve to slow the economy, including interest rate hikes.
Continued Labor Strength Amid Supply-Demand Mismatch:
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- Despite the Federal Reserve’s efforts to slow the economy and address a supply-demand mismatch between companies and the available labor pool, labor strength persisted. Central bank policymakers have identified this mismatch as a factor contributing to the highest inflation levels in more than 40 years. The unexpected drop in initial jobless claims was accompanied by a decline of 26,000 in continuing claims, reaching a total of 1.806 million, which was below the FactSet estimate.
Mixed Economic Indicators and Optimism in Housing:
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- Economic indicators presented a mixed picture, with the Philadelphia Fed reporting a manufacturing index reading of -10.6 for January, indicating a difference between companies reporting growth and contraction. While this marked an increase from December, it fell below the Dow Jones estimate. The gauge showed declines in unfilled orders, delivery times, and inventories. On a positive note, a separate report showed optimism for housing, with building permits totaling 1.495 million, a monthly increase of 1.9%, slightly above the estimate. However, housing starts experienced a 4.3% monthly decline, totaling 1.46 million, though it exceeded the estimate. The Federal Reserve’s Beige Book report highlighted mostly stagnant economic activity since late November, with signs of a cooling labor market and lower wage pressures, while high interest rates were noted to limit housing activity. Prospects of future easing from the Fed raised hopes for an accelerated pace in the housing sector.
The US labor market demonstrated unexpected resilience in the early weeks of 2024, as initial jobless claims experienced a surprising drop, reaching 187,000 for the week ending January 13. This marked the lowest level since September 24, 2022, representing a significant 16,000-decline from the previous week and surpassing the Dow Jones estimate of 208,000. Despite the Federal Reserve’s efforts to slow the economy, particularly the job market, through interest rate hikes, labor strength has persisted. Federal Reserve policymakers have linked the supply-demand imbalance between companies and the available labor pool to the inflation surge witnessed, the highest in over 40 years.
Alongside the decline in weekly claims, continuing claims also unexpectedly dropped by 26,000, lagging a week behind. The total for continuing claims reached 1.806 million, below the FactSet estimate of 1.83 million. Despite potential signs of fewer monthly hires, employers seem focused on retaining existing workers, offering higher wages due to the competitive labor market, as noted by Robert Frick, corporate economist at Navy Federal Credit Union.
In other economic news, the Philadelphia Fed reported a manufacturing index reading of -10.6 for January, indicating the difference between growth and contraction. Although this marked an improvement from December’s -12.8, it fell below the Dow Jones estimate of -7. The gauge revealed a decline in unfilled orders, delivery times, and inventories, with the employment index showing some improvement but remaining negative at -1.8. Additionally, measures of prices paid and received eased from December.
A separate report on housing showed a degree of optimism, with building permits totaling 1.495 million, a 1.9% monthly increase and slightly above the estimated 1.48 million. However, housing starts experienced a 4.3% monthly decline, totaling 1.46 million, although this outperformed the estimated 1.43 million.
These reports followed the Federal Reserve’s Beige Book report, which indicated stagnant economic activity since late November. The report highlighted little or no change in economic activity overall, with signs of a cooling labor market and lower wage pressures. On the housing front, high interest rates were reported to limit activity, though the prospect of future easing from the Fed raised hopes for a potential acceleration in the pace of activity.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/01/18/weekly-jobless-claims-post-lowest-reading-since-september-2022.html
