LIVE MARKETS-Cred to the Fed? Jobless claims jump, trade gap hits narrowest in over five years

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CRED TO THE FED: JOBLESS CLAIMS JUMP, TRADE GAP NARROWEST IN OVER FIVE YEARS

Defenders of Powell & Co's December rate might look to today's data to support the notion that a softening labor market warranted the move.

But is it smoke and mirrors?

Last week, 236,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, a 22.9% jump from the previous week and 16,000 more than analysts expected.

Ironing out weekly volatility, the four-week moving average of initial claims now has a slight upward bias, but remains comfortably within the range associated with healthy labor market churn.

At any rate, the recent spate of corporate layoff announcements is yet to have an obvious impact on the claims data.

In fact, the oversized moves in this week's claims data can be at least partially blamed on seasonality.

"Taking the past few weeks together, claims remain relatively low despite a recent uptick in layoff announcements," writes Nancy Vanden Houten, lead U.S. economist at Oxford Economics.

Surprising in the other direction, ongoing jobless claims USJOBN=ECI, which are reported on a one-week lag, unexpectedly dropped 5.1% to 1.838 million, or 109,000 shy of consensus. While still elevated, the jumbo-size weekly plunge happens at a time of weak hiring and consumer survey data that suggests laid-off workers are finding it increasingly difficult to find a replacement gig.

It's possible that at least some of the drop can be attributed to benefits expiry, but not all of it.

"Continued claims aren't immune to seasonal volatility so we won't read anything into that decline," Houten adds.

Separately, investors were graced with trade data harkening back three months, when the government was a mere gleam in Washington's eye.

Way back in September, the trade gap USTBAL=ECI, or the difference in the value of goods and services imported to the U.S. and those exported abroad, unexpectedly narrowed by 11.0% to $52.8 billion.

The reading is 2.3% narrower than economist predictions, notching the lowest trade deficit since June 2020.

Under the hood, exports grew by 3.0% with a boost from a weak dollar, while the ebbing effects of punishing tariff policies helped imports, which account for the lion's share of the United States' total international trade and which partially rebounded from August's 5.2% drop, edging up 0.6%.

Imports are a GDP detractor, so the shrinking trade deficit could bode well for the Commerce Department's next take on July-September GDP, if it ever arrives.

"We aren’t sure we’ll see consistently smaller trade deficits going forward,” says Oren Klachkin, financial markets economist at Nationwide. “Looking ahead, we see the trade deficit remaining relatively wide next year."

"Firmer export growth fueled by a pickup in global demand and weaker dollar will be largely offset by stronger imports that will be a consequence of firmer US domestic demand."

(Stephen Culp)

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