Jobless Claims Encouraging Ahead Of Payrolls

Jobless Claims Encouraging Ahead Of Payrolls

Jobless claims may have risen slightly last week, but the amount was minimal, enough to keep intact a rosy picture of the US labor market.  



Jobless Claims Encouraging Ahead Of Payrolls
Jobless Claims Encouraging Ahead Of Payrolls

The number of Americans claiming unemployment insurance for the first time increased by just 3,000 last week, taking initial jobless claims to 265,000, a much better number than had been anticipated (the consensus analyst estimate was for 280,000). This is more than 30,000 better than the sample week in April for the monthly employment report, suggesting healthy improvement in the weeks since. Further evidence is provided by the four-week moving average falling to a 15-year low of 279,500.

Friday sees the release of the monthly Employment Situation, which include official government figures for non-farm payrolls and the unemployment rate, along with other key metrics for the labor market. It is a report that is always closely watched by market participants and expectations point to a bounce back in April from the anaemic 126,000 payroll growth seen in March to push growth above the 200,000 mark. If ADP’s estimation of private payrolls is accurate, though, we may be in store for another disappointing result: the ADP employment report gauges private payrolls to have risen by just 169,000 in April, an even worse result than March. This will not boost hopes for the government report, but ADP has frequently demonstrated a poor correlation with the actual data released by the Bureau of Labor Statistics.

One of the major stories in the financial markets this week has been the resurgence of the price of oil.  US crude oil futures broke above $60 a barrel earlier in the week, part of a bigger trend that has seen crude move steadily higher since the middle of March. Part of the reason behind the gains can be explained by the recent weakness in the US dollar —as the commodity is priced in dollars, it becomes more attractive to overseas investors if the dollar weakens — but inventory data released yesterday by the US energy department also suggests we could be starting to see an alleviation in the surfeit of supply that has plagued oil this year. The Energy Department revealed that the US stockpile of crude shrank by 3.9 million barrels last week, the first weekly decline since the beginning of the year. Crude futures reached as high as $62 a barrel on Wednesday in the wake of the report, but eased on Thursday, dropping 0.8% to $60.42. A rebound in oil should spur a pick-up in inflation expectations, something that is unlikely to go unnoticed by hawks at the Fed.

 The US stock market opened slightly lower on Thursday, the robust jobless claims helping to combat the downward sentiment of a substantial sell-off in European markets. Shortly after the open, the Dow Jones was down 27 points or 0.15%, while the broader gauge of the S&P 500 Index fell just 0.10% to 2078.0.

In the forex market, the British pound was little-changed against its major peers, reflecting the poll-backed view that the UK national election, currently underway, is headed toward a hung parliament, a situation where no party holds an absolute majority of parliamentary seats. GBP/USD was down 0.34% at 1/5195 in early trading, while GBP/EUR rose 0.3% to 1.3475.


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