US: Initial Jobless Claims dropped to 227K last week
- Initial Jobless Claims eased to 227K vs. the previous week.
- Continuing Jobless Claims rose to 1.903M.
US citizens filing new applications for unemployment insurance receded a tad to 227K for the week ending May 17, as reported by the US Department of Labor (DOL) on Thursday. This print came in below initial estimates and the previous week's unrevised tally of 229K.
The report also highlighted a seasonally adjusted insured unemployment rate of 1.2%, while the four-week moving average increased by 1K to 231.5K from the prior week’s unrevised average.
Moreover, Continuing Jobless Claims went up 36K to reach 1.903M for the week ending May 10.
Market reaction
The Greenback alternates gains with losses around the 99.70 zone when tracked by the US Dollar Index (DXY) in the wake of the release, practically unfazed following the data. Meanwhile, investors remain laser-focused on developments from the Trump’s sweeping tax bill and the US trade policy.
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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