Initial jobless claims fell to 263,000 for the week ended October 3, a moderate decline from the previous week’s revised result of 276,000. The less volatile 4-week moving average also declined by 3,000 to 267,500.
Jobless claims data has remained a relative bright spot in recent months even as some labor market data has softened. The 4-week moving average has been consistently below 300,000 since March and remains near its fifteen-year low.
Particularly in light of the sub-par September jobs report that confirmed a slowdown in the pace of job creation in recent months, solid and steady jobless claims has been a source of reassurance about labor market conditions. As such, jobless claims releases will be closely watched in the coming weeks, as any sustained surge in claims would be viewed as confirmation of further softening in the U.S. economy.
The recent weakness notwithstanding, payroll growth has been constructive through much of 2015, as the economy added jobs at a pace nearing 200,000 jobs per month through the first three quarters. Absent a pickup in the final quarter, however, the economy is poised to create fewer jobs this year than in 2014.
Conviction around the strength of labor conditions has faltered, but the overall trend in job creation and the continued decline in the jobless rate provide support for the full employment component of the Fed’s dual mandate. Conversely, inflation and inflation expectations continue to fall short of the Fed’s goals, held in check by muted wage growth, falling energy prices and the strong U.S. Dollar.
Disinflation, and more recently faltering growth outside the U.S., have been the stated rationale for the Fed’s decision to extend its near-zero interest-rate policy longer than originally anticipated.
Although the Fed concluded to not raise interest rates last month, the post-meeting statement indicated that the majority of FOMC members maintain the belief that it will be appropriate to raise rates before the end of the year. Whether data will support such a move remains to be seen, but financial market gauges of the path for Fed policy suggest a high degree of skepticism among investors.