3 Numbers: US jobless claims set to confirm stronger labour market
- US jobless claims expected to tick lower and remain close to a 43-year low
- Will the firmer US labour market raise Bloomberg’s weekly consumer survey index?
- USDJPY raises possibility of dipping below 100 for first time in nearly three years
US: Initial Jobless Claim (1230 GMT) The labour market data continues to go from strength to strength. The momentum started with last week’s solid increase in nonfarm payrolls in July and continued with the upbeat news for the Fed’s Labor Market Conditions Index in July and yesterday’s increase in job openings in June.
The improvement in the labour market appears to be spilling over into estimates for third-quarter GDP. The Atlanta Fed’s GDPNow model is currently projecting a dramatic rebound in growth to 3.7% for Q3 (seasonally adjusted annual rate), based on the August 9 update. That’s up sharply from Q2’s tepid 1.2% rise.
Today’s weekly release on new filings for unemployment benefits is on track to continue the run of positive news. Econoday.com’s consensus forecast sees initial jobless claims dipping slightly to 265,000 from 269,000 previously. The larger message is that claims are expected to stick close to a 43-year low of 248,000, which was set back in April.
Today’s claims update, in short, may convince a few more macro pessimists that the outlook for the US is improving.
Gallup’s weekly economic confidence poll suggests as much. This benchmark in the first week of August held on to the bounce in late July, delivering the strongest two-week run for the index since March.
Considering the latest run of numbers, it’s reasonable to expect that we’ll soon see a bounce in the monthly survey data that tracks the consumer sector. The University of Michigan’s Consumer Sentiment Index slumped to a three-month low in July. But sentiment will probably perk up in the wake of data from the labour market since that report was published late last month.
Today’s weekly update from Bloomberg will offer an early clue on whether firmer numbers in payrolls are influencing the mood on Main Street. Considering what we’ve learned over the past week, it’s likely that the Consumer Comfort Index will at least hold steady.
A month ago it appeared that the yen was finally weakening after a bull run for much of 2016. But the bounce in USDJPY turned out to be another temporary revival. As of midday trading on Wednesday, USDJPY had fallen to roughly 101.280, which is close to around the 100.545 level – the lowest since late 2013.
As the already lofty yen continues to strengthen, the blowback on Japanese corporate profits and trade will become increasingly painful. A stronger yen will also strengthen the disinflationary headwinds for Japan, which will be hard to stomach for the Abe government, which is still fighting the battle to lift pricing pressures.
It’s hard to imagine that the BoJ will stand by and let USDJPY sink below 100 without stepping into the market on some level. Exactly what the BoJ will or won’t do remains unclear at the moment.
“While central bankers are pulling their hair out about being overburdened and going on about structural reforms, they know that they can’t be seen to be giving up,” advised the global chief economist at HSBC Bank earlier this week. Policymakers “have to be very, very careful about sending a signal that they’ve done all they can".
Meantime, gravity is again working against the BoJ. USDJPY is once more trading well below its 50-, 100-, and 200-day moving averages. Short of a dramatic announcement from BoJ, the possibility is rising that the dollar will soon trade below ¥100 for the first time in nearly three years.