Photo: US Navy
Ever since Friday’s thud of a jobs report, we’ve been waiting for this: more information on the labour picture in the US. It comes today with the 8:30 AM ET release of initial claims.Here’s Deutsche Bank with a preview:
This morning’s jobless claims report is the most important piece of data in what has otherwise been a pretty barren week. Claims are one of the best leading indicators of the labour market, and their inability to move significantly lower earlier this year proved to be a presage of the modest private job gains to date (averaging just +106k per month). Recently, claims have finally broken out of their range, as illustrated in the chart below. Claims had been essentially range-bound between 490k and 450k for most of the year, but over the past month, the 4-week moving average has dipped below 450k. We are inclined to focus on the moving average because of the inherent volatility of the data, especially around this time of the year when holidays and inclement weather can substantially distort the weekly figures. Last week, the 4-week moving average fell 6k to 431k, the lowest reading since August 2, 2008. Combined with what we have observed in employee tax receipts, which are running above 6% thus far in December, the drop in claims may be pointing to stronger payroll gains in the coming months. In fact, it is interesting to note that private payrolls in the second half of this year in not-seasonally adjusted terms are up the most since the comparable five month period in 2005, which is actually the second strongest five month period in the last 11 years. If claims fall 11k to 425k this morning, the 4-week moving average would edge 3k lower to 428k. In terms of sturdy payroll gains, we believe we need to see the 4-week moving average break below 400k before we will become more confident the labour market is improving in a more substantive way than what has occurred to this point.
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