Initial claims for unemployment insurance remained very low for the week ended February 18, increasing by 6,000 to 244,000, above consensus expectations for 240,000.
Despite that increase, the four-week moving average of jobless claims dipped by another 4,000 to 241,000, a new low point in the current cycle and close to its lowest point in four decades.
A weekly jobless claims level below the 300,000 mark is generally indicative of a healthy labor market. This morning’s release marks the 103rd consecutive week that jobless claims have come in below that threshold – the longest such streak since 1970, when the American workforce was considerably smaller.
This high-frequency litmus test of the labor market reinforces the continued strength in the jobs market that has been characterized by low layoffs, increasing job openings, and solid growth in nonfarm payrolls. In addition, growing evidence of stronger wage growth is a positive development for consumers, supporting household spending growth.
Last month, payrolls surged to start the year, blowing past consensus estimates with broad-based gains across the private sector. Nonfarm payrolls rose 227,000, lifting the three-month average to 183,000. The persistently low level of claims data bodes well for the February jobs report, with nonfarm payrolls poised to increase. With that survey also being conducted this week, all indications are that job creation remains solid, underscoring the resiliency of the nearly eight-year economic recovery.
Coupled with rising inflation pressures, continued tightening in labor market conditions are likely to nudge the Fed to raise policy rates another quarter point in the near term. Most expect that move to come at the FOMC’s May policy meeting, although a March hike cannot be ruled out.
As a solid “real-time” indicator of the overall strength of the economy, the low level of layoffs bodes well for near-term growth, and continued strength in labor market conditions bodes well for consumer spending.