Jobless claims fell a third consecutive week in the US, bolstering the glass-half-full narrative.
779,000 Americans filed for unemployment benefits last week, the fewest since November. Consensus was looking for 830,000.
The headline figure remains well above the pre-pandemic record and is still extremely elevated, underscoring acute suffering on Main Street. Still, the past three weeks are a welcome development on the heels of a sudden spike in early January.
The previous week was revised lower. The 4-week moving average fell 1,250 to 848,250.
This comes on the heels of upbeat ADP employment data and amid whispers of a large upside surprise on Friday’s January jobs report. A large move higher in the employment subcomponent of ISM services on Wednesday added to the anticipatory fervor.
“Since last Friday, the Street’s expectation has already risen from just 40,000 net new jobs to 100,000 [but] the range of estimates remains very wide, suggesting the consensus view does not have a high degree of certainty,” Mizuho said Thursday. “We would not be surprised if the actual payroll number comes in north of our above-consensus 125,000 estimate and was considered a disappointment.”
That underscored how rapidly expectations were evolving. The latest claims figures weren’t germane to that in a mathematical sense, but they were incremental to the narrative.
Continuing claims for the week ended January 23 were 4.592 million, the lowest since March. That was also better than the market expected. Consensus was 4.7 million.
The market “risk” (if that’s the right word) is that improvements in the labor market and the comparatively rapid dissemination of the vaccines combined with falling virus cases and receding hospitalizations end up tightening financial conditions on any upward move in yields and/or recovery in the dollar.
The 5s30s hit 147.7bps following the data. That’s the widest since October 2015.
Meanwhile, Republicans have a habit of citing incrementally positive economic data when arguing against stimulus. So, the better the data, the more entrenched pretensions to fiscal rectitude will become.
That, in turn, may mean that a Democrat-only bill will increasingly be seen as the only viable option for passing Joe Biden’s relief plan in any recognizable form.