US: Initial Jobless Claims dropped to 245K last week

Initial Jobless Claims decreased to 245K vs. the previous week.
Continuing Jobless Claims went down to 1.945M.

Pablo Piovano FXStreet

US citizens filing new applications for unemployment insurance dropped to 245K for the week ending June 14, as reported by the US Department of Labor (DOL) on Thursday. This print matched initial estimates and came in below the previous week's revised tally of 250K (revised from 248K).

The report also highlighted a seasonally adjusted insured unemployment rate of 1.3%, while the four-week moving average rose by 4.750K to 245.50K from the prior week’s revised average.

Moreover, Continuing Jobless Claims shrank by 6K to reach 1.941M for the week ending June 7.

Market reaction

The Greenback resumes its decline, giving away part of Tuesday’s strong recovery amid lower US yields across the curve and steady prudence among market participants ahead of the key FOMC event later in the day. That said, the US Dollar Index (DXY) failed to retest the key 99.00 barrier, slipping back to the mid-98.00s in the wake of data releases.

Employment FAQs

How do employment levels affect currencies?

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.

Why is wage growth important?

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.

How much do central banks care about employment?

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

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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