Earlier this week I wondered if the deteriorating state of macro in the Eurozone would eventually pinch the US economy. Some degree of blowback is likely, although for the moment there’s no sign of turbulence, according to this morning’s weekly update on initial jobless claims. It’s still early in the game for detecting signs of imported trouble from Europe. But it’s certainly encouraging to see that the US trend by way of claims looks robust as we head into a period that may be challenged with a nasty storm from abroad. Indeed, today’s numbers on new filings for unemployment benefits clearly show that positive momentum in the US labor market remains intact.
Claims dipped by 1,000 for the week through October 4 to a seasonally adjusted 287,000 from the previous week’s revised estimate. The slight decline, which represents an eight-year low, moves this leading indicator a touch closer to the 14-year trough of 279,000 that was reached a few months ago in mid-July. It’s anyone’s guess how claims will evolve in the weeks and months to come, but for the moment there’s still a hefty tailwind blowing in favor of growth.
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The upbeat trend looks particularly potent from the perspective of the year-over-year percentage change. Indeed, claims dropped by more than 20% last week vs. the year-earlier level. That’s the biggest annual decline since last November. The degree of the slide strongly suggests that positive momentum is firmly rooted in the US labor market in early October.
“We’ve had a good start to employment growth in the first nine months of this year, and there’s absolutely no indication that this trend is breaking heading into October,” observes Guy Berger, US economist at RBS Securities. “The stage is set for another pretty good employment month.”