The number of initial jobless claims in the United States fell for the second consecutive week, dropping to levels prior to the onslaught of hurricanes "Helen" and "Milton" on the southeastern states. For the week ending October 19th, initial jobless claims decreased by 15,000 to 227,000, with economists' median forecast at 242,000.
Stephen Stanley, Chief U.S. Economist at Santander US Capital Markets, stated in a report: "The impact of Hurricane Helen seems to dissipate faster than people feared, which is a positive sign indicating that the economic impact of the hurricane did not rapidly spread across the entire region."
The four-week moving average of initial jobless claims rose to 238,500, an indicator that helps to smooth out volatility. Data released by the U.S. Department of Labor on Thursday showed that the number of continuing claims for unemployment benefits increased to nearly 1.9 million in the previous week, the highest level in nearly three years.
The increase in the number of people receiving benefits raises the risk of a rise in the unemployment rate this month. The Federal Reserve's "Beige Book" report released on Wednesday stated that employment "slightly increased" at the beginning of October, with over half of the regions reporting slight or moderate growth, and the rest reporting little to no change.
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Traditionally, an increase in jobless claims indicates greater difficulty in finding work, but recent data may reflect the impact of the two storms. Economists say that the ongoing strike at Boeing (BA.US) for several weeks may also have obscured the signal in the data. On Wednesday, about 33,000 factory workers rejected a new labor contract, and the strike continues.
Before adjusting for seasonal factors, the number of initial jobless claims in North Carolina, Georgia, and Tennessee, which were affected by Hurricane Helen, decreased last week. The report also showed a significant drop in initial jobless claims in Ohio, Indiana, and Michigan; these states had recently seen a resurgence in unemployment claims against the backdrop of layoffs in the manufacturing sector.
U.S. Treasury yields were buoyed by the data showing no large-scale layoffs. The initial jobless claims data supported market expectations for the Federal Reserve to cut interest rates gradually. The "FedWatch" tool from the Chicago Mercantile Exchange (CME) showed that the probability of a 25 basis point rate cut in November rose from 92% yesterday to 97% now. The U.S. Dollar Index also recovered slightly, with yields on 10-year and 2-year U.S. Treasuries rising, both slightly above levels before the data was released.
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