United States weekly Initial Jobless Claims decline to 187K vs. 212K expected
- Initial Jobless Claims in the US declined by 22,000 in the week ending July 18.
- The USD Index stays in positive territory well above 101.00.
There were 187,000 Initial Jobless Claims in the week ending July 18, the US Department of Labor (DOL) reported on Thursday. This print followed the previous week's reading of 209,000 and came in much better than the market expectation of 212,000. The 4-week moving average stood at 207,500 in this period, a decrease of 7,250 from the previous week's revised average.
"The advance number for seasonally adjusted insured unemployment during the week ending July 11 was 1,796,000, a decrease of 2,000 from the previous week's revised level," the DOL further noted in it press release.
Market reaction
The US Dollar (USD) preserves its strength after this data. At the time of press, the USD Index was up 0.22% on the day at 101.35.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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