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Rise in US Jobless Claims Belies Robust Recovery

by Matt Eidinger | April 8, 2021

Mixed jobless claims data released in the US this morning were not a completely accurate reflection of the continued underlying improvement in the American labor market.

According to the Department of Labor, there were 744,000 new claims for jobless benefits last week – a 16,000 rise and a disappointment for markets looking for another attempt at breaching the 700,000 mark. But, in mirror-like fashion, the total number of claimants for continuing jobless claims sunk 16,000 to 3.73 million for the week ending March 27 – the lowest level since March 21, 2020.

The modest rise in weekly claims for unemployment insurance is not entirely surprising, since regional spikes in COVID-19 infections have prompted targeted lockdowns in certain parts of the country.

The US dollar was unchanged after news hit the wire, having already rallied nearly 100 ticks against the Canadian dollar earlier in the week. On a trade-weighted basis, the greenback has declined about 0.20% this morning, and US treasury yields are down slightly as markets digest this morning’s economic release alongside yesterday’s FOMC meeting minutes.

Total benefit claims – including those related to pandemic assistance programs and extended benefits – were largely unchanged, totaling over 18 million according to data from the most recent week for which data is available, March 20.

Today’s news comes less than 24 hours after the release of the minutes for the most recent Federal Reserve meeting from mid-March. The Fed was notably optimistic about the recovery effort underway in the United States, noting the euphoria President Joe Biden’s $1.9 trillion dollar stimulus measure will inject into the economy.

Four of the eighteen voting members of the FOMC cited the possibility of raising rates as early as 2022, but more than three quarters envision the first quarter point hike coming no earlier than 2023, when they expect the economy to have achieved full employment and inflation to have consistently hit the 2% mark.

As things stand now, overnight index swaps at the Chicago Mercantile Exchange currently peg the chances of a quarter point hike to the fed funds rate by December at slightly under 11%.

A similar tone of optimism was echoed in the European Central Bank’s Monetary Policy Meeting Account, released earlier this morning. In the statement, central bank officials applauded the recently passed US stimulus measures and noted steepening yield curves around the world – a clear sign of a coordinated global economic recovery.

Currency markets now turn to Statistics Canada, which is set to report Canadian employment figures for March tomorrow morning. Market commentators are eying roughly 100,000 new jobs in Canada, which may sound high considering recent pandemic restrictions that will push many Canadian provinces towards lockdown and further away from economic recovery in the coming weeks.

 

Matthew Eidinger
Market Strategist & Fintech Specialist

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