This week’s jobless claims report saw initial claims rise by 7,000 claims (3.32%) to 218,000 for the week ending November 25th while the 4-week moving average, which is used to smooth out the volatility seen in the weekly initial jobless claims, saw a minor drop of 500 to 220,000 claims, thus making this week’s reading fall below the average.
On the other hand, there was a huge surge in continuing jobless claims which hit 1.972mn for the week ending November 18th. This demonstrated an increase of 86,000 claims (4.67%) from the previous week and was 55,000 claims above what economists had forecast. This brought CJC to its highest level since November 2021.
Although the increase in both IJC and especially CJC may be dramatic, it is not surprising given the backdrop of higher interest rates and consumers reigning in their spending by 0.5% this month (Personal Spending MoM 30/11/23). Higher interest rates are likely feeding into consumer spending as debt servicing digs into disposable income. This is suggested by the consumer credit report earlier this month which saw the value of outstanding consumer credit increase to $9.05bn for September, higher than the $-15.79bn for August. With consumers spending less money on products, it is causing less demand for employees to both make and sell said products, thus leading to increased claims. Thus, as long as interest rates stay at their current, restrictive level, it is likely that the trend in both IJC and CJC will continue.
This reading suggests that the US labour market is starting to loosen which is ideal in the eyes of the FED as it increases the chances of inflation falling to the 2% target sooner. However, its implications on GDP are not so good….
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