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US Jobless Filings Increases

By Patrick Higgins  |  14/08/2017 06:47
Amidst a tightening US job market, filings for unemployment have surprisingly risen this past week 1.
According to a Labour Department statement released today, state unemployment filings were revised upwards from 241,000 to 244,000 for the week ending on the 5th of August.  Additionally, filing data was adjusted upwards by 1,000 for the previous week ending on July 29th.  Despite an unexpected spike, claims overall have been in decline.  Nationally, the moving-average of claims per month fell by 1,000 to 241,000 for July, the lowest rate seen since May.  Similarly, the number of people requesting continued aid after a week of unemployment benefits dropped 16,000 from 1.95 million the week ending July 29th as well, with continuing claims hovering under two million for the 17th straight week.  The monthly moving-average of continuing claims increased by a mere 500 to 1.97 million, falling below the 2 million mark. 
In the past eight years of unhampered economic growth, it is only in 2017 that these claims averages have fallen below the 2 million mark.  Unemployment claims overall have been sub-300,000 for 127 consecutive weeks.  Interestingly, the last time similar levels were observed consistently was in the early 1970's, before the Yom Kippur War and the oil embargo.  At that point, the labour market was also considerably smaller (81,981,000 compared to 160,494,000 today), highlighting the strength of the US labour market.
Economic expansion in the US continues to show strength, despite geopolitical wrangling abroad.  As per government data released last week, NFP employment increased by 209,000 in July, bringing the growth in employment this year up to 1.29 million.  The unemployment rate declined in conjunction by 5/10 a percentage point, bringing the total rate downwards to 4.3%.
With the US economy nearing full employment, there may be little room for unemployment claims to fall substantially further.  However, this is of little consequence to the Federal Reserve.  Due to the strength of the American economic recovery, the Fed has continually increased interest rates.  With the indication that full employment is feasible soon, and with the unlikeliness of any further significant expansion of labour, Janet Yellen and the rest of the Federal Reserve could be prompted to announce their comprehensive plans for unwinding their $4.2 trillion balance sheet of government bonds at next month's policy briefing.  Whether they will stop buying all at once per their open market operations (OMO) has yet to be seen, but if the decision to stop buying bonds and securities entirely was taken next month, the Fed's balance sheet could decrease by up to $280 billion through the end of this year.
Regardless of the final decision the Federal Reserve takes regarding its OMO direction, the US economy continues to be healthy.  Though the dollar has taken several hits this year due to unpredictable political events, tense foreign affairs and inflammatory comments from its President, America's major stock indexes continue to reach record highs and job growth continues to move upwards.  Just at the beginning of this week, the Dow Jones closed at 22,118.42; its ninth highest closing in a row.  Similarly, such small bumps upwards in unemployment claims can be expected, given the volatility of such a large economy like that of America.  The labour force in America is comparable only to such nations like India and China, and the idea of the American economy nearing full employment is phenomenal.  Though some attribute the rapid expansion of employment to part-time jobs, an economy as versatile as America's can be expected to smooth itself out.  Overall, continued positive growth seems to be on the US' horizon.  We will be following up with the decision of the Fed regarding the tightening of its Treasury bonds portfolio in the coming weeks.


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