Jobless claims return to norm after one-week spike

Key Concepts:

• Initial Jobless Claims: Number of new claims for unemployment benefits.
• Continuing Claims: Number of people receiving unemployment benefits.
• Philadelphia Fed Manufacturing Index (Philly Fed): A monthly survey of manufacturers in the Third Federal Reserve District (eastern Pennsylvania, southern New Jersey, and Delaware), indicating business conditions.
• Labor Market: The availability of employment and labor, considered in terms of supply and demand.
• Interest Rates: The cost of borrowing money, expressed as a percentage.

Jobless Claims Data:

• Initial Jobless Claims: The report indicates initial jobless claims came in at 231,000, lower than the expected 240,000. This is the lowest number since the third week of August.
• Revision of Previous Week: The previous week's initial jobless claims were revised upwards from 263,000 to 264,000. This upward revision is considered "confusing" because the initial spike was attributed to an error in Texas data.
• Impact of Revision: The speaker notes that the initial inaccurate spike in claims led many, including himself, to downgrade their assessment of the labor market. The higher revision raises questions about the true state of the labor market.
• Continuing Claims: Continuing claims showed a decrease, falling to 1,920,000. The previous week's number was also revised down from 1,939,000 to 1,927,000.
• Historical Context: The speaker notes that the last time continuing claims were this low was in May of this year (third week).

Philadelphia Fed Manufacturing Index:

• September Reading: The Philly Fed business outlook for September came in at 23.2.
• Significance: This is a "powerful" number and the best level since January, making it the second-best number of the year.
• Previous Performance: The speaker notes that this number has been "somewhat depressed" previously.

Market Reaction and Synthesis:

• Interest Rate Movement: The report indicates that interest rates are moving higher.
• Possible Driver: The speaker suggests that the increase in rates may be driven by the initial jobless claims backing up to 231,000.
• Treasury Yield: The 10-year Treasury yield jumped to near 4.08%.

Notable Quotes:

• "And there's some surprising issues here." - Rick Santelli, referring to the jobless claims data.
• "...that one pop that was described as inaccurate due to Texas really led to consequences where many, including myself, downgraded the labor market." - Rick Santelli, explaining the impact of the initial jobless claims spike.

Conclusion:

The report presents a mixed picture of the labor market. While initial jobless claims are lower than expected, the upward revision of the previous week's data raises concerns. Continuing claims are decreasing, but the Philly Fed manufacturing index shows a strong positive reading. The market reaction, with interest rates moving higher, suggests that investors are focusing on the potential for continued economic strength despite the mixed labor market data.