Why does Labor market data fail to encourage tapering?
Initial jobless claims for unemployment benefits in the week ended 28 August, fell to a fresh low after the recovery started. According to labor market data, Initial claims decreased 14K to 340K. Estimates for this period was a slight decrease to 345,000. Continuing claims for state benefits also eased to 2.748M in the week ended Aug. 21.
At the first look, we could see the positive numbers there, however, we have some concerns that caused reversed effect on the market. These data showing us that while it is way above the pre-pandemic level, it is also telling us that the hiring pace is slowing down. If you compare the numbers, easily can see the 400K claims to ease to the 340K, took five weeks, and while before that, 60K decrease in the claims took just two weeks.
On the other hand, the average daily death, caused by Covid-19, increased to 1,400 and the incidence of new cases is near record highs. These concerns were a bit more obvious in the service sector in past days, like air travel, restaurant dining, and hotel occupancy faced difficulties. It is not the all, summer holidays also finished and it will affect the short term jobs in the following weeks. All telling us that being an optimist is a bit early!
And finally, tomorrow we will have NFP numbers. Usually, the initial jobless claims before NFP do not affect the market too much. All these data and numbers telling us why we have to see another new record!