Article / 13 October 2016 at 4:59 GMT

3 Numbers: US jobless claims to remain close to 43-year low

editor/analyst /
United States
  • US jobless claims expected to tick higher, but continue near multi-decade low 
  • Expectations for a Fed rate hike continue to raise the 10-year Treasury yield 
  • Donald Trump’s fading electoral fortunes appear to be lifting the Mexican peso

By James Picerno

The US labour market is back in focus today with the weekly update on jobless claims. Meanwhile, the US 10-year yield continues to rise on expectations that the Federal Reserve will raise interest rates by the end of the year. In addition, the Mexican peso is strengthening in the wake of Donald Trump’s fading prospects for an election victory in November’s US presidential election.

US: Initial Jobless Claims (1230 GMT) Economists are expecting that today’s weekly update on new filings for unemployment benefits will continue to cast a bullish glow over the outlook for the labour market.

 Taking the recent claims numbers at face value suggests the US economy’s capacity to mint new jobs at a healthy pace remains intact. Photo: iStock’s consensus forecast sees claims ticking up to a seasonally 254,000 for the week through October 8, but that’s just shy of the previous week’s 249,000, a hair above a 43-year low. Taking the recent numbers at face value suggests that the US economy’s capacity to mint new jobs at a healthy pace remains intact.

If the projection for claims holds, the news will help soothe worries over last week’s September data for payrolls. The seasonally adjusted gain of 156,000 marks a four-month low for growth. Last month’s negative reading for the Federal Reserve’s Labor Market Conditions Index looks a bit worrisome as well.

Today’s update on claims appears set to remain the antidote of choice for relieving anxiety regarding the near-term outlook for job growth. But at this late date in the business cycle, there’s an ongoing debate about the relevance of low jobless claims and the connection with future hiring.

“With labour increasingly scarce and expensive, employers need to hold onto their existing staff, even though most surveys suggest their enthusiasm for new hiring has diminished since the early part of the year,” the chief economist at Pantheon Macroeconomics observed last week.

Even so, jobless claims that are low and/or falling is still preferable to a rising tide of layoffs. By that standard, today’s release will likely provide a degree of comfort, even if it’s getting tougher to equate diminished claims numbers with stronger expected hiring.

US: 10-Year Treasury Yield The benchmark 10-year yield inched up to another four-month high yesterday, reaching just below the 1.80% mark. “I think it's all about rates and discounting the coming [Fed] rate hike,” advised the chief market economist at First Standard Financial.

The policy sensitive 2-year yield has also been rising lately, strengthening the view that the crowd is increasingly expecting that the central bank will tighten policy before the year is out. As of mid-day trading on Wednesday, the 2-year reached 0.88%, the highest since late-May.

Fed fund futures continue to price in a roughly 70% probability of a rate hike at the December FOMC meeting, based on CME data, although the Fed is expected to leave rates unchanged in next month’s monetary announcement.

What might derail the market’s hawkish outlook? A weak retail sales report for September is a possible source of attitude adjustment. But tomorrow’s update is expected to bring the opposite.’s consensus forecast see consumer spending rebounding sharply with a 0.6% gain for last month, which would be the strongest advance since June. Assuming the forecast holds, the prospects for even higher Treasury yields by the end of the week is a reasonable estimate.

USDMXN The Mexican peso has been strengthening in recent weeks, perhaps because Donald Trump’s campaign for the US presidency has been stumbling in October.

The “Make America Great Again” candidate has been critical of immigration and trade policy with Mexico over the course of his campaign. As a result, Mexico’s currency has been widely cited as a barometer of the ebb and flow of Trump’s popularity.

Looking at polling data suggests a connection. For example, Trump’s estimated chance of winning the election has been sliding since late September, according to’s forecasting model. The real estate mogul’s probability of moving into the White House this January dipped to 13.5% yesterday, down sharply from over 45% on September 26.

Meanwhile, the peso has strengthened over that period. USDMXN, which falls when the peso rallies in dollar terms, has eased 4% since September 26.

Trump’s election prospects have also fallen on hard times lately according to’s aggregated polling data. The website reports that the poll average in the Donald’s favour was a relatively light 41.8% on Wednesday, down from a two-month peak of 45% on October 2.

Nonetheless, it’s unclear if USDMXN’s rising trend this year has been broken. But for the moment, Trump’s candidacy remains on the defensive and it’s not obvious that’s he’s about to regain lost ground in the polls. As such, the political winds appear to favour ongoing strength for the peso.

 Create your own charts with SaxoTrader; click here to learn more

– Edited by Susan McDonald

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.

Karen Holander Karen Holander
This comment has been redacted


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail