Mind the Labor Market
Central bankers are watching this incoming data.
Data collected by the US Department of Labor show seasonally adjusted initial claims for unemployment insurance were up 13,000 from the previous week’s unrevised count of 229,000 to 242,000 during the week ending June 8.That’s the highest advance figure for initial UI claims since August.
The four-week moving average increased by 4,750 from an unrevised 222,250 to 227,000.
That’s the highest four-week moving average since September.
UI claims is a noisy but timely measure of conditions in the labor market, a leading indicator of the unemployment rate, a lagging indicator.
Recent numbers could reflect holiday and seasonal factors.
Given the Federal Reserve’s dual mandate – stable prices and maximum employment – it’s probably a good time to focus a little tighter on this “canary in the coal mine.”
There will be no absolute signal of labor market distress in today’s numbers. There is rarely a single piece of incoming data so strong that it alone determines policy outcomes.
It is fair to say Fed officials, including the seven who spoke on Tuesday, will be watching how today’s numbers develop over time.
Making his first major policy speech, St. Louis Fed President Alberto Musalem said it could be “months, and more likely quarters” before the data support an initial cut. Dallas Fed President Lorrie Logan said “we’re going to need to see several months” of cooling.
New York Fed President John Williams didn’t share a time frame but noted “a disinflationary process continuing” and said he expects inflation to cool into next year.
Likewise, Richmond Fed President Thomas Barkin wasn’t date-specific but said “we will learn a lot more over the next several months” about “sustainment and broadening” of disinflation.
Boston Fed President Susan Collins said it’s still too soon to say whether inflation is trending sustainably toward 2 percent. And Chicago Fed President Austan Goolsbee said “hopefully we'll see more like” the “excellent” May Consumer Price Index number.
Mish Schneider emphasized the importance of the consumer to the US economy during her June 17 Weekly Market Outlook.
As simple as it is to say, the consumer is only as strong as the labor market.
We’ll see what this morning’s incoming data indicate, for the economy and for the Fed.