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Initial Claims Reach Historic Low Level


The years-long healthy U.S. labor market has hit its apex with this morning’s weekly Initial Jobless Claims figures: 196K new claims falls through the 200K floor for the first time this century, and reaches its lowest point since the week of October 4, 1969 — the same week “Sugar Sugar” by The Archies topped the Billboard pop charts.

This also marks the fourth-straight drop in initial claims, for a 4-week moving average of 207K — also an historic low point in recent history. Expectations had been for last week’s claims to be around 210K, following the previous week’s upwardly revised 204K. But any way you look at it, these numbers speak to an enormously robust employment situation in the U.S.

To “belabor” this labor-based report a bit further, back in 1969 the average cost of a gallon of gasoline was 35 cents. Average income for an American worker per year was around $8500. The Dow Jones closed the year around 800 points. And we were fewer than 3 months removed from Neil Armstrong’s moon landing.

Continuing Claims, from the week previous, fell by 13K to 1.713 million. This is still slightly higher than the 1.6 million or so we were seeing late last summer, but consistent with these historic employment figures.

What we saw last week, however, in terms of non-farm payroll figures, is that wage growth is currently slowing. With such a tight workforce at present, this is an historic anomaly — much more typical of job openings everywhere one looks is that wages increase, sometimes explosively. This, then, would lead to rising rates and prices of goods, becoming a key catalyst for economic inflation. And at that point, the Fed would step in to raise interest rate levels to absorb some of this inflation before it spins out of control.

Because this is not happening, we now entertain the idea that we’re back in Goldilocks territory, from an investor perspective: low rates, maximum employment and wages only rising in small increments. This would speak to the “gig economy” — driving a Lyft LYFT or an Uber, gaining independent freelance work, etc. — playing a large part in such strong employment figures.

Of course, the windfall corporate tax breaks passed in late 2017 also must be considered as having a positive affect on things like jobless claims. As should aggressive trade and immigration policies by the Trump administration, which would appear to be allowing U.S. goods manufacturers, etc. to take a bigger slice of the pie.

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