Thursday, December 5, 2024

The final Jobs Week of 2024 continues this morning, with Weekly Jobless Claims reporting mixed results, whether we’re looking at new claims or longer-term ones. Pre-market futures have not budged from prior to these new numbers hitting the tape, and at this hour, market indexes are rolling back those fresh all-time closing highs that have been the narrative of the week so far.

Initial Jobless Claims Tick Up, Continuing Claims Down

Initial Jobless Claims bumped up to +224K last week, the first time this print has gone above +220K since the first week of November. It’s up 9K from the previous week’s upwardly revised +215K from the previous week — but still representative of a healthy labor situation overall. (Recall two months ago, new jobless claims shot up temporarily to +260K for one week.)

Continuing Claims, on the other hand, dipped back below 1.9 million for the first time in three weeks: 1.87 million is lower than analysts had anticipated. That said, we remain on a higher tier that we haven’t seen for three years — up toward 2 million longer-term jobless claims. But even at that level — which, subtracting the Covid era, we hadn’t seen since 2016 — it’s not necessarily a cause for concern.

Trade Deficit Shrinks in October

The other economic report ahead of today’s opening bell in the U.S. Trade Balance, which has always posted a deficit for nearly 50 years, came in lighter than expected: -$73.8 billion, from the -$74.8 billion consensus estimate. It’s also better than the previous read, which reached a more than two-year low to -$84.4 billion, and the slimmest deficit since August of this year. Weaker oil prices are likely informing much of this deficit relief.

What to Expect from Friday’s Jobs Report

The Big Kahuna of this final Jobs Week of the year comes tomorrow morning: non-farm payrolls and a new Unemployment Rate, together which constitute the Employment Situation report for November. Estimates for job gains are currently +214K, although perhaps with something of a downward bias based on ADP ADP private-sector payrolls Wednesday coming in lighter than anticipated.

The Unemployment Rate is expected to tick up 10 basis points (bps) to 4.2%, which would make seven months in a row of +4% unemployment or higher. This in itself is not a cause of concern, however; a gradual unwinding of the labor market from historically strong levels, if nothing else, will help keep the Fed’s dot plot for lowering interest rates intact.

The things to watch out for are big surprise swings in this data — either much higher or much lower. Obviously, if we see another +12K new jobs created like we did last month (which was explained away by hurricane conditions in the Southeast for October), this would illustrate a far weaker labor market than we’ve seen since the Covid pandemic. And if we’re much higher than +200K, this may bring into question whether the December 18th anticipated 25 bps interest rate cut will happen as planned. The Fed, after all, is guarding against inflation and in favor of full employment. Will it need to cut if employment is perceived as “full”?

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