Layoffs remain near multi-decade lows, and claims declined between the September and October payroll survey weeks. The weak spot is hiring: people who lose jobs are taking longer to find new ones.
Initial claims for state unemployment benefits fell by 6,000 to a seasonally adjusted 194,000 in the week ended Oct. 17, the Labor Department said on Thursday. Economists had expected 200,000. The prior week was revised to 200,000, and the four-week moving average edged down by 1,000 to 197,750.
The number sits just above the 189,000 recorded in the week of July 18, which was the lowest since the late 1960s. Before seasonal adjustment, claims totaled 172,390.
Treasury yields fell sharply anyway. The 10-year yield traded near 4.96% in the early afternoon, down about 18 basis points on the day, and was already lower before the report came out at 8:30 a.m. The data did not drive the bond move. If anything, it argued against it.
A labor market that does not fire, and does not hire much either
The claims series measures layoffs, and layoffs remain rare. That is the core of the case that the labor market can absorb higher rates. Claims also fell between the reference weeks for the September and October employment surveys, a pattern Reuters said suggests job growth picked up in October.
The weaker half of the picture shows up in the people already out of work. Insured unemployment, or continuing claims, rose by 25,000 to 1.728 million in the week ended Oct. 10, and the insured unemployment rate held at 1.1%. The median duration of unemployment was 11.5 weeks in September, near its longest in about four and a half years.
Put together, the data describe a market with low turnover: employers are holding on to workers but adding few, so those who are displaced stay unemployed longer.
Why the bond market looked past it
One interpretation is that the claims data support the Fed's hawkish lean. A labor market this tight leaves little reason for policymakers to back away from the December hike that prediction-market traders still see as more likely than not.
The other is that low layoffs mask softer demand for workers, which would let bond investors focus on growth risk, in this case a sharp selloff in technology shares and weaker confidence data from Europe. Rising continuing claims and long unemployment spells give that view some support, though neither has yet translated into a jump in job losses.
What to watch
The October employment report is the next major test of which reading holds. Before that, the Fed meets on Oct. 27 and 28. A further rise in continuing claims in the coming weeks would strengthen the case that hiring, not firing, is where the labor market is cooling.