The economic calendar is empty in the European session, so the market will likely continue trading based on yesterday’s benign US CPI report, which should have set the positive trend in risk assets for the next few weeks.
There is, however, one data point that could ruin the positive mood: US jobless claims data.
U.S. UNEMPLOYMENT CLAIMS 12:30 p.m. GMT (08:30 a.m. ET)
U.S. jobless claims continue to be one of the most important releases to follow each week because it is a more current indicator of the state of the job market. Indeed, disinflation reaching the Fed’s target is more likely with a easing labor market. A strong labor market could make it more difficult to achieve the goal.
Initial claims continue to hover around cycle lows, while continuing claims remain firm around the 1,800,000 level. Last week, initial claims surprisingly missed expectations and reached their highest level since August 2023 .
Bloomberg reported that this spike coincided with a recess in New York City public schools. Markets will therefore want to see if last week’s numbers represent the start of a trend (given leading indicators pointing to a weaker labor market) or just a blip.
Today, initial claims are expected at 220,000 compared to 231,000, while continuing claims are estimated at 1,780,000 compared to 1,785,000 previously.
WHY IS THIS IMPORTANT?
The data tracks new claims for unemployment insurance benefits from the previous week, which is why the actual name of the report is “weekly unemployment insurance claims.” If people lose their jobs, they apply for unemployment insurance, which will be reflected in the data. Higher unemployment is bad for the economy because it will lead to lower spending and businesses cutting back on investment. On the other hand, a low number of applications can indicate a strong job market, which is good for the economy as a whole.
Unemployment claims data are considered a leading indicator due to their timeliness and are included in the Conference Board’s Leading Economic Index (LEI). It should be noted, however, that not everyone is eligible for unemployment benefits, which can sometimes lead to large discrepancies between the total number of unemployed and the number of people receiving unemployment benefits. Additionally, data can be volatile from week to week, so one should not rush to draw conclusions based on a single publication.
It is nevertheless a good current barometer on the state of the job market. Generally, numbers above the 300,000 level signal a deterioration in the labor market, with the 400,000 level potentially indicating an ongoing recession. This is also true for continuing claims, even if the level is around the 3,000,000 mark. Of course, the data should always be taken in the right context and emphasis should also be placed on the trend and the rate of change.
OTHER RELEASES
We will also receive other economic reports during the US session that are not expected to move the market but are worth watching overall. In order of importance:
- U.S. industrial production and capacity utilization 1:15 p.m. GMT (09:15 a.m. ET).
- Housing starts and building permits in the United States 12:30 GMT (08:30 ET).
- Philadelphia Fed US manufacturing index at 12:30 GMT (08:30 ET).
Fed speakers are unlikely to deviate from their earlier comments as they will want to maintain the status quo for now:
- Fed Barr (Dove – Voter) 2:00 p.m. GMT (10:00 a.m. ET).
- Fed Harker (neutral – non-voting) 2:30 p.m. GMT (10:30 a.m. ET).
- Fed Mester (neutral – voter) 3:30 p.m. GMT (11:30 a.m. ET).
- Fed Bostic (hawk – voter) 7:50 p.m. GMT (3:50 p.m. ET).
This article was written by Giuseppe Dellamotta on www.forexlive.com.
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