Initial claims for Americans applying for first-time unemployment insurance fell to 199,000 for the week ended January 19, coming in well below expectations of 218,000. Claims for the prior week were also revised downward by 1,000 to 212,000. The four-week moving average declined meaningfully to 215,000. That also compares favorably to the comparable period last year, when initial claims were at 237,500.
The outright strength of the labor market shouldn’t be overlooked or understated. Even if this dip below 200,000 is brief, it represents the lowest total for initial claims since November 1969, when the labor force was about 35% smaller than it is today. As a percentage of the total labor force, it is even more impressive.
For all of the angst and hand wringing about the slowdown in growth that is underway, it is hard to find cracks in the labor economy. Job creation is strong, layoffs are exceptionally low, and unemployment remains quite low, even as people are re-entering the labor force in response to the abundance of unfilled openings. Wage growth, while still relatively low, is edging higher.
Yes, there is uncertainty. Slowing growth outside the U.S. and unresolved trade tensions, particularly with China, are risks to the economy. Questions around the Fed’s plan for rate hikes in the coming year also persist, with some concerned that the central bank may overplay its hand and snuff out growth.
Among the more notable risks that has arisen in recent weeks is a direct byproduct of turmoil in Washington and the ongoing government shutdown, which creates an additional headwind to the economy. A quick resolution would limit the impact, but the longer it draws out, the greater the risk, both directly and in terms of sentiment. While the broader economic implications of the shutdown are difficult to quantify, it’s possible that jobless claims in the coming weeks could edge higher as some portion of the furloughed workers may be able to file for unemployment benefits.
Despite all of those risks, labor market conditions remain resoundingly positive – a critical support to household spending and the overall demeanor of U.S. consumers.
The bottom line is that if you’re looking for good news on the economy, look no further than the labor market. Growth may be slowing, but the overall picture for workers and those seeking work remains quite positive.
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