The US Department of Labor published weekly data on unemployment benefit claims. Initial claims came in at 197 thousand against a forecast of 200 thousand. The figure turned out slightly better than expectations and confirmed that there is no sharp rise in layoffs in the US so far.
What came out on initial claims
In the week to October 3, the number of new claims was 197 thousand. This is 2 thousand less than the previous week. The previous reading was revised upward from 197 thousand to 199 thousand. The four-week average fell to 198 thousand, which is 2.5 thousand less than the previous reading. Initial claims are considered one of the most timely indicators of layoffs in the US labor market.
What is happening with continuing claims
Continuing claims rose to 1.716 million against a forecast of 1.708 million. This is 17 thousand more than the previous week. Such data show the other side of the labor market. There are relatively few new layoffs, but for those who have already lost their jobs, it is becoming harder to quickly find a new employer. The four-week average meanwhile fell to 1.711 million. The insured unemployment rate remained at 1.1%.
How bonds reacted
The yield on 10-year US Treasuries rose to 5.324%. This is right up against the recent cycle high of around 5.365%. High yields show that the market sees no urgent need for a rapid easing of Fed policy. The stronger the labor market looks, the fewer reasons there are to expect a near-term rate cut.
What happened with the indices
The stock market reacted with a decline. The Dow Jones was losing about 400 points. The Nasdaq 100 was falling by roughly 241 points. Rising yields put pressure on stocks, as they increase borrowing costs and make government bonds more attractive relative to riskier assets.
What is happening inside the labor market
The overall picture remains uneven. According to September data, over the past 12 months the information sector lost about 120 thousand jobs. The financial sector cut about 107 thousand. The government sector lost roughly 216 thousand jobs. This shows that the resilience of the labor market is distributed unevenly across industries.
Why the report matters for the Fed
The surprise itself turned out to be small. The difference between the actual figure and the forecast was only 3 thousand claims. But the data do not show a sharp deterioration in employment. Consequently, the Fed has not received a new strong argument for a rapid easing of monetary policy. At the same time, rising bond yields are already tightening financial conditions in the economy on their own.
What's next
The market will continue to watch whether initial claims begin to rise steadily in the coming reports. The dynamics of continuing claims are also important in their own right. If they continue to increase, this could signal that the labor market is gradually losing its ability to quickly absorb the unemployed. For now, the main conclusion remains the same: there are no mass layoffs, but finding a new job is becoming harder.
Were you in a trade at 15:30?
Even a small deviation from the forecast can quickly move yields, the dollar and stock indices. For a prop trader at such moments, the program's rules are especially important. Somewhere it is prohibited to hold positions during the release of important data, somewhere restrictions concern the size of leverage, and the daily drawdown limit may be calculated according to different rules. Such conditions are best checked in advance.