Claims data shows job market is cracking

Current Situation


Initial jobless claims came in worse than forecast at 235K (230K). However, this print is also up from the last number of 231K. The middle chart shows the initial claims series - it is above its three-month simple moving average. Moreover, the continuing claims are at 1,375K, higher than last week's 1,324K. It is unlikely that these numbers will alter the Fed's path. Nevertheless, of concern, continuing claims have moved above their three-month simple moving average (black rectangle - bottom chart). This development is a degradation in the job's data and coincides with the inversion of the 2-10s yield curve (top chart). If the continuing claims SMA turns up, that will further show weakness.

Past Inversions


Serious breakdowns have followed the previous 2-10s yield inversions of 1989, 2000, and 2007 in both the initial and continuing claims series (blue dashed verticals). If the Fed continues with a 75bps hike this month and another 50bps in September, the current inversion will likely deepen. This course is the communication given from the minutes of the June meeting. Suppose the previous years' patterns hold; the first real job market cracks have appeared. All eyes now turn towards tomorrow's NFP release.

Image by Matthew Priest from Pixabay

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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