Initial Jobless Claims in U.S. Increase for September, But Were Still Below Estimates

Key takeaways

• Initial jobless claims only rose by 2,000 from the week before and below the consensus estimates
• Fears over the Fed having to push interest rates higher again are deepening
• Stock futures declined, and bonds were up at the news

Despite everything being thrown at it, the U.S. jobs market still holds up far too well. U.S. initial jobless claims for the last week of September only increased marginally, adding further fuel to the fire that the Fed might look to raise interest rates again.

The unemployment data comes at a time when the labor market still shows mixed signs of running too hot and cooling off, which doesn’t make anyone’s guess about where the economy is headed any easier.

Let’s understand what’s going on with the weekly unemployment claims and whether they impacted the markets, and if a recession might be on the cards.

What happened with the latest unemployment data?

Initial filings for unemployment benefits totaled a seasonally adjusted 207,000 for the week ending September 30, which was an increase of just 2,000 and just below the Dow Jones consensus estimate of 210,000. Economists surveyed by FactSet had expected 212,500.

The data comes after private payrolls only grew by 89,000 in September, which was far below Wall Street estimations and marked the slowest private payroll growth since January 2021. The month before saw 180,000 added to private sector payrolls.

According to the ADP jobs report, annual wage growth also stood at 5.9% in September, marking a full year without any gains. However, there was bad news in the form of an unexpected surge in job openings in the Labor Department’s JOLTS report, which recorded 9.6 million job openings versus the 8.8 million expected.

How did the markets take the news?

Stocks were down, and bonds were up in reaction to the new data. Dow Jones futures declined by 125 points or 0.4%, the S&P 500 futures declined by 0.4%, and the Nasdaq Composite futures fell by 0.5%.

With bonds, the 10-year Treasury bill’s yield shot up to 4.76%. Bonds have been hitting multi-year records in the last two weeks as concerns deepened about the Fed needing to raise interest rates for longer than the markets had anticipated.

The Fed has continuously said it’s being led by the data to determine interest rates, which are now at a target range of 5.25% to 5.5% — the highest in 22 years.

The bottom line

It’s one of those “good news is bad news” situations where economists and Wall Street will have been hoping for higher unemployment figures to dissuade the Fed from implementing higher interest rates.

It’s a real coin toss as to whether you want to interpret the latest unemployment figures as good or bad. But what it’s assured is that all eyes will be on the government data about nonfarm payrolls released on Friday to further determine what the Fed might be thinking.