US: Initial Jobless Claims dropped to 227K last week
- Initial Jobless Claims fell to 227K vs. the previous week.
- Continuing Jobless Claims increased to 1.965M.
The US Department of Labour (DOL) reported on Thursday that the number of US citizens submitting new applications for unemployment insurance fell to 227K for the week ending July 5. The latest print fell short of initial estimates and the revised figure from the previous week, which stood at 232K after being adjusted from 233K.
The report indicated a seasonally adjusted insured unemployment rate of 1.3%. Additionally, the four-week moving average decreased by 5.750K, bringing it down to 235.5K from the revised average of the previous week.
Moreover, Continuing Jobless Claims rose by 10K to reach 1.965M for the week ending June 28.
Market reaction
The Greenback maintains its trade in daily highs in the wake of the data release, reversing Wednesday's losses and motivating the US Dollar Index (DXY) to regain the upper end of the range near 97.70.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
Author
FXStreet Team
FXStreet
