Will QE be Implemented with Jobless Claims Near Post-recession Lows?
By Rom Badilla, CFA, Bondsquawk
Despite slightly more people filing for unemployment benefits for the first time, the current trend should bode well for overall job growth for the U.S. economy. The U.S. Department of Labor released its weekly report on the number of people seeking unemployment benefits which showed a modest increase from the prior week.
For the week ending August 11, Initial Jobless Claims increased to 366,000 individuals which was for the most part in-line with market expectations as evident with the median of economists’ forecasts. The prior week was revised upward slightly by 3,000 more to a total of 364,000 people.
Despite the slight uptick, the four-week moving average fell to 364,000 people which is near the post-recession low.
Initial Jobless Claims 4-Week Moving Average
Initial Jobless Claims is a timely and simple gauge to determine the strength of the job market and the U.S. economy. Fewer people filing for unemployment benefits, suggests that more people are working and have jobs.
Use of the four-week moving average can smooth out the weekly fluctuations which in turn, allows data watchers to understand baseline trends in the job market. An average above 400,000 is associated with job losses for the U.S. economy as has been the case in prior recessions. Conversely, an average below that threshold coincides more with job creation.
The recent trend, barring a major surprise in next week’s Claims number, should lead to a modest improvement in next month’s Non Farm Payrolls data release which is scheduled to be revealed on September 7. This should provide the Federal Reserve another data point to factor into their decision to embark or not on another round of Quantitative Easing. Given the recent string of modestly improving economic data, it appears that QE is not in the cards at their next meeting slated for mid-September.
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