US initial claims inched upward by just 1,000 to 308,000 in the week ending September 28, 2013 after dipping 4,000 to a revised 307,000 (was 305,000) the previous week. Markets expected a slightly higher 315,000 reading in the latest week.
The four-week moving average of initial claims dropped to 305,000, which was its lowest level since May 2007. The measure was biased lower earlier in September as computer glitches in some states led to delays in filing claims. That backlog, however, has now been cleared with today’s report providing, on balance, a ‘clean’ reading. Continuing claims, for the week ending September 21, 2013 by jumped 104,000 to 2,925,000.
The dip in the four-week moving average of initial claims to a new cycle low in the latest week reinforces the view that underlying labour market conditions were still improving in September. We will have to wait a little longer than usual for the September payroll employment report with the partial shutdown of the Federal government delaying tomorrow’s scheduled release of the data indefinitely. We expect that, when eventually reported, the payroll report will show that 185,000 jobs were added on net in September, which would be up from 169,000 and 104,000 gains in August and July, respectively. Beyond September, there is a risk that the shutdown of the federal government, as well as another contentious debate over the arguably more urgent need to raise the debt ceiling, could weigh on business confidence and hiring. We assume, however, that the shutdown will be relatively short and that the threat of default, and resulting negative fallout for the economy, will be enough to force Congress to agree to an increase to the debt limit. As a result, we expect any hit to hiring in October to be temporary and not enough to offset an underlying positive trend in job growth evident in the recent jobless claims numbers.
RBC