Initial claims for unemployment insurance fell to 246,000 for the week ended January 28, down 14,000 from the previous week’s revised tally of 260,000.
The 4-week moving average edged higher to 248,000, but remains near its cyclical low reached a week ago. Markets will undoubtedly view today’s reading as confirmation of continued strength in the jobs market rather than predicting an underlying trend.
Jobless claims below 300,000 are generally indicative of a very healthy labor market. Today’s release marks the 100th consecutive week that jobless claims have been below that threshold, which is the longest such streak since 1970. With the 4-week average still hovering near 250k, claims also remain near their lowest point since the 1970s.
The uptick in claims in the preceding week was more than likely an anomaly driven by a surge in layoffs in California, which spiked by nearly 17,000. Conversely, in the week just ended, no states experienced an increase of more than 1,000 claims, while claims declined by more than 1,000 in 20 states.
Job creation slowed in 2016 to a monthly pace of about 180,000 from nearly 230,000 in 2015. Nonetheless, job creation remains robust and indicative of solid – if unspectacular – growth in the economy. Moreover, current conditions suggest that the economy is nearing full employment, making it tougher for employers to fill open positions. The result is typically a slowdown in the pace of hiring given constraints on the supply side rather than slowing demand.
Further evidence of that is becoming increasingly clear in a variety of gauges of wage growth and labor costs, most of which have accelerated. That dynamic was reinforced this morning by the report on nonfarm productivity, which slowed to just 1.3 percent in the fourth quarter, while unit labor costs rose by 1.7 percent. Over time, this would be expected to also put upward pressure on inflation, reinforcing expectations for the Fed to remain on a tightening path in the coming months.
Historically, jobless claims have served as a leading indicator for the health of the labor market and for the economy as a whole. Recent readings continue to point to a job market where employers are confident of continued gains and content to maintain or expand their workforce.