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January 23, 2020 Blog 1 min read
Despite last week’s increase in jobless claims, the narrative is still positive with the labor market strength continuing into 2020.
January 22 Jobless Claims ChartInitial claims for Americans applying for first-time unemployment insurance edged higher by 6,000 to 211,000 for the week ended January 18, coming in below expectations of 214,000. Claims for the prior week were revised higher by 1,000 to 205,000. The four-week moving average of jobless claims edged lower to 213,250.

The increase reversed a five-week streak of consecutively lower claims, but still illustrates a very positive narrative: labor market strength has rolled over nicely into 2020.

Since bottoming in April, initial claims had drifted higher and hit an intra-year peak in early December as the pace of economic growth slowed. The impact of the trade standoff with China was one notable catalyst that hit the manufacturing and agricultural sectors particularly hard, and was also a key factor behind employers trimming payrolls in manufacturing, energy, and transportation.

Since early December, claims have fallen considerably and are once again near their multi-decade lows, the modest increase last week notwithstanding.

Labor market conditions have remained generally positive, although the pace of job creation has slowed as the pool of untapped labor has been nearly exhausted. It has become increasingly difficult for employers to fill open positions, although demand is coaxing more people back into the labor force. The challenge for employers is illustrated in the sizable gap between job openings and layoffs; while job openings have dipped modestly in the past year, they remain near their cyclical highs. Despite slower job creation, the unemployment rate held steady at 3.5% in December and the measure of discouraged and underemployed workers fell to its lowest level on record.

Sturdy labor markets have been part of the equation for extending the expansion into its 11th year and a critical underpinning for consumer confidence and spending. The Fed’s policy reversal and resulting trimming of short-term interest rates was also key, providing reassurance that the central bank was not steadfastly committed to continuing to tighten even as the economy showed signs of faltering. Layer in the recent easing of trade tensions between the U.S. and China and the narrative has clearly shifted away from one of concern that recession risk was rising toward a growing belief that the economy is reasonably well positioned to continue to grow for some time.
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Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.