Do Higher Jobless Claim Trends Pose a Threat to Fed Rate Hikes?

Right now is a very difficult time for bulls and bears alike. Investors and economic watchers alike are looking for just about any data point they can find to support a bullish or bearish thesis for the economy. The bears remain scared of the Federal Reserve as various Fed presidents have stepped all over themselves in 2016 to talk up the notion of more rate hikes ahead. All of this is as the stock market got the worst one-week annual start of our lifetimes.

One problem that has come into play is not just a volatile stock market. The jobs market reports from December were great, but the more recent jobs data signals to at least some weakness.

Thursday morning’s weekly jobless claims were shown to be up by 7,000 to 284,000 in the week of January 9. Bloomberg was calling for about 275,000 and the prior week’s report was 277,000. It was just a few weeks ago that the changes were seen closer to 250,00 for record lows. Now they are already at highs since last summer.

A lot of the report can be seasonal from hires and furloughs, but the Labor Department reports its claims on a seasonally adjusted reporting basis. The 4-week average was up by another 3,000 to 278,750 last week.

While the Fed knows that weekly jobless claims are volatile, the
continuing claims was up by a sharp 29,000 to 2.263 million. That is also the highest going back to last summer.

maybe it matters that the BLS said there were no special factors behind the rise. Still, many fears go beyond the seasonality of jobless claims at the end of a year and at the start of a year.

Thursday’s report rising for a second week in a row may temper some of the great strength seen for the December payrolls. If the jobs market remains firm but less strong in January versus December, then the hope will be for slow enough growth that the Fed presidents on the FOMC won’t be too hell-bent on raising interest rates too fast.  Maybe.