US Labor Market Upbeat

Sandwiched between yesterday’s ADP ADP private sector jobs report and tomorrow’s Bureau of Labor Statistics’ (BLS) non-farm payroll report, weekly Initial Jobless Claims were released before the bell today. Claims have ballooned up from an unchanged 251K last week to 268K this week. This keeps us within the 4-week moving average of a 250-275K range, which remains consistent with a strong U.S. labor market.

However, the 17K jump is pretty substantial, especially coming as it does at the dawn of a new holiday season, when temporary jobs appear by the bushelful in retail, leisure and logistics spaces. Glancing back at yesterday’s ADP numbers, 216K private sector jobs was well ahead of the 170-180K analysts had expected — and they were factoring in holiday seasonality already.

Looking both forward to Friday’s big jobs report and the results from the BLS last month, analysts expect a big upturn tomorrow from October’s less-than-expected 161K new U.S. jobs. If ADP reached 216K, how high could this number go when we add government jobs into the mix? Is 250K possible (which we saw plenty of times in 2015)? Further, the unemployment rate looks to dip even lower into the 4-handle to 4.8%. All of this suggests, the 17K jump in claims today notwithstanding, that the labor market has tightened in a meaningful way.

Read Zacks Chief Strategist John Blank’s latest Global Week Ahead, where he lays out his predictions for econ data in the week, including tomorrow’s BLS report. Click here.

Perhaps because there is evidence of more Americans re-entering the workforce following a long stretch of little to no job opportunities, this will soak up more of the strain developing in the labor market. We may even see an impressive jobs number (John Blank called 230K prior to ADP’s big upside surprise) translate into a higher unemployment figure, say to 5.0% or so. But all of this shows strength from an historic perspective. And this is before President Trump takes over, in whose tenure is promised millions of even more jobs.

Oil prices continue to gain following OPEC’s decision to cut production by over a million barrels: WTI and Brent indices are both back over $50, with seemingly little resistance to move up further in the near-term. Market futures are up ahead of today’s opening bell, and the yield on the 10-year has now ratcheted up to 2.4%.

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