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Friday, June 21, 2024

Recent Jobs Data Could be What The Fed is Looking For

Key Takeaways:

  • For the week ending May 4th, initial jobless claims rose to 231,000, higher than the expected 210,000 and the previous week’s 209,000.
  • One of the anticipated consequences of tightening monetary policy is the cooling of the labor market.
  • Investors may view the rise in jobless claims as a necessary step towards achieving the Fed’s goal of price stability.

Jobs Data

The latest jobs data from the United States has shown an increase in initial jobless claims, above both the previous figures and consensus expectations. For the week ending May 4th, initial jobless claims rose to 231,000, higher than the expected 210,000 and the previous week’s 209,000.

Initial Jobless Claims

The four-week average of jobless claims, which helps to smooth out weekly fluctuations, also increased to 215,000 from the previous week’s 210,250. This could be a sign that the Federal Reserve’s efforts against inflation are starting to affect the job market.

The Federal Reserve

One of the anticipated consequences of tightening monetary policy is the cooling of the labor market. As borrowing costs increase, businesses may become more cautious about hiring, leading to a slowdown in job growth and a potential rise in unemployment.

Interestingly, the financial markets reacted positively to this news, with the S&P 500 closing 0.51% higher on the day. This suggests that investors may view the rise in jobless claims as a necessary step towards achieving the Fed’s goal of price stability. A more balanced labor market could help alleviate inflationary pressures, as wage growth may moderate when there is less competition for workers.

S&P 500 1-Minute Chart

The U.S. Dollar Index (DXY) fell by 0.3% following the release of the jobless claims data. This decline in the dollar’s value could be due to the market’s expectation that the Fed may not need to raise interest rates as aggressively if the labor market shows signs of cooling.

DXY 1-Minute Chart

However, I wouldn’t say it’s the end of the dollar’s uptrend against currencies like the JPY, there isn’t enough data to go off of. The CME Fedwatch tool currently expects interest rates to fall in September of 2024. The recent jobs data could be the start of inflation declining in the longer term, but for now, the carry trade still exists in major currencies.

CME September 2024 Probabilities
Lazarus
Lazarushttps://ljlnews.com
Publisher and editor of LJLNews. I am a Stock Market enthusiast, with an interest for politics. I hope you enjoy reading the articles! Contact me at: Lazaruslucas@ljlnews.com

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