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By Maulik Mody – Bondsquawk.com

Bringing some positive news about the economy after yesterday’s ADP reports suggested loss in private jobs, the Labor Department reported that the number of people filing for jobless claims for the first time fell in the week ended Oct 2. Initial jobless claims fell by 11,000 to 445K, after claims for the previous week revised up to 456K. The numbers beat economists’ expectations of a drop of 2000.

Claims unexpectedly fell to the lowest level in three months, indicating that companies may have slowed their pace of firing. This brings the four month moving average, which is gauged to smooth volatility in the data, down by 3000 to 455.75K. But even as jobless claims fall slightly, unemployment rate still remains high which curtails consumer spending.  It is important to note that continuing claims excludes the number of people whose claim benefits have expired and now receive emergency benefits. This figure increased by 257K to 5.14 million in the week ended Sep 18. Continuing claims for the week ended Sep 25 decreased to 4462K after an upwardly revised 4510K in the previous week.

Shedding more light on the numbers, BNP Paribas said in an email to its clients,” We are beginning a time in the year when claims rise on a non-seasonally adjusted basis as construction workers begin to get laid off owing to the seasonal slowdown. Unseasonably warm weather may delay those layoffs leading to a dip in the seasonally adjusted readings. Indeed NSA initial claims edged down 1.5k leading ths SA measure to dip 11k. The restructuring in key sectors such as autos and construction have led to some difficulties in seasonally adjusting and interpreting jobless claims.”

The Labor Department is set to release its monthly employment report for September. Although economists expect fewer job cuts, they still expect a slight increase in unemployment. If employment reports released tomorrow are as weak as expected, it will indicate a sluggish labor market amidst a slowing recovery, instigating the Fed to ease monetary policy further.

Stocks were flat when seen last at 10PM. The S&P was 0.50 points weaker at 1159.34.Treasuries continued their gains from yesterday as the 10-Yr was last trading a basis point lower at 2.30%. The 5-Yr shed 3 basis points to reach yet another record low of 1.13%.

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