Jobless claims remain low while GDP growth accelerates, signaling labor market resilience, economic momentum, making a case for pausing rate cuts.
The job market is holding up fairly well, with jobless claims rising less than expected in the recent reporting week, while a separate report showed that the economy expanded at the fastest clip in two years.
What Jobless Claims Say About Labor Market: The number of individuals claiming unemployment benefits came in at 200,000 for the week ended Jan. 17, according to a Department of Labor (DOL) release. This marked a 1,000-increase from the previous week’s upwardly revised reading of 199,000.
Economists, on average, expected the number of individuals claiming unemployment benefits to rise to 209,000 from the initially reported 198,000 for the previous week.
The four-week moving average, which smooths volatility, fell 3,750 to 201,500 from the previous week’s revised average. The DOL stated the average for the latest reporting week was the lowest since January 13, 2024.
Source: DOL
Among the other key data, continuing claims declined 26,000 to 1,849,000 for the week ended Jan. 10 from the previous week’s revised level of 1,875,000. This metric refers to people who have already filed an initial claim and are still filing for unemployment benefits.
More Positive Economic Tidings: A separate report released by the Bureau of Economic Analysis (BEA) showed that the U.S. economy grew at a seasonally adjusted annual rate of 4.4% in the third quarter, slightly faster than the 4.3% rate estimated in December. The growth rate marked an acceleration from the 3.8% pace in the second quarter and was the fastest since the third quarter of 2023, when the economy expanded by 4.7%.
The BEA clarified that the second estimate released on Thursday replaced the third estimate, which was due on Dec. 19, due to the government shutdown.
The variance related to the initial estimate was attributed to upward revisions to exports and investment, which were partly offset by a downward revision to consumer spending. Imports, which are subtracted during GDP calculation, were revised up.
Source: BEA
Relative to the second quarter, growth came from increases in consumer spending, exports, government spending, and investments, while imports decreased.
Among the pricing metrics, the price consumption expenditure (PCE) index rose 2.8% in the third quarter, and the core PCE index grew 2.9%. This compares to increases of 2.1% and 2.6%, respectively, in the year-ago period.
How Futures Market Reacted To Data: The E-mini S&P 500 futures rose immediately after the release of the data but have since given back some of the gains. The benchmark 10-year Treasury note yielded 4.261%, up about a basis point, reversing some of the declines seen on Wednesday.
The front-month gold futures slipped modestly amid the strong economic data.
What The Twin Reports Mean For Rates: The Federal Reserve, which is set to meet next week to hand down its first monetary policy decision of the year, has its task cut out. The central bank has been signaling that it would adhere to its data-dependent stance. The strong numbers could give the Fed leeway to pause following three straight quarter-point rate hikes last year.
The Atlanta Federal Reserve’s GDPNow estimate for the fourth quarter, which is based on mathematical modeling incorporating a raft of data, released on Wednesday, showed growth accelerating further to 5.4%, buoyed by resilient consumer spending and strong private investment.
All eyes now turn to the upcoming personal income and spending report for November, which has been delayed due to the government shutdown. The report comprises inflation data, which is called the Fed’s favorite inflation gauge.
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