MACRO: Jobless claims fell to lowest level since April, leaving room for more hikes

The number of weekly jobless claims dropped by 16k to 193k in the week that ended September 24, well below analysts’ projections of 215k,  On a non-seasonally adjusted basis, initial claims fell by 12,642 to 156,060, with notable decreases seen in Michigan (-5,674), New Jersey (-1,521), and New York (-1,266). The 4-week moving average, which removes week-to-week volatility, fell by 8,750 from the prior week to 207k. Continuing Jobless Claims decreased to three month low of 1347 thousand in the week ending September 17,  from 1376 thousand in the previous week. The economy is slowing down, yet businesses keep holding on to their employees amid a shift in the nature of the workforce. The labor participation rate remains one full percentage point below the pre-pandemic level.

Claims reached the lowest level since the end of April 2022 despite several rate hikes, therefore further tightening is expected. Source: US Department of Labour

Today's report points to an increasingly tight labor market and added more room for interest rate hikes by the US central bank. St Louis Fed President Bullard also mentioned that jobless claims were 'super low', which is imperative to avoid 70s inflation. Despite resilient labour market he sees higher risk of recession, but that is not the base case at this time. Meanwhile core PCE prices for the second quarter have been revised higher to 2.0% after rising 1.3% prior quarter, which raised more concerns that inflation is becoming even more entrenched, which dented market sentiment even further. At the moment it seems that Fed Chair Powell's plan to lower inflation by cooling the labour market does not seem to be heading in the right direction.