194K: US Initial Jobless Claims fell last week

194K: Initial Jobless Claims fell from the previous week.
1.728M: Continuing Jobless Claims moved higher.

US initial unemployment insurance claims fell to 194K. Thursday’s report from the US Department of Labour (DOL) showed that the number of US citizens filing new applications in the week ending 17 October was below the initial estimate of 200K. It also fell short of the previous week’s 200K, revised from 199K.

At 197.75K, the 4-week moving average was down 1K from the previous week’s revised reading of 198.75K.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

For the week ending 10 October, Continuing Jobless Claims reached 1.728M, an increase of 25K, according to the report.

101.80: US dollar recovers ground

Trading near 101.80 on Thursday, the US Dollar Index (DXY) posts solid gains as the Greenback finds renewed upward momentum. The advance recoups part of the losses from its recent multi-day decline.

Employment: key questions

Employment and currency values: what is the link?

As a measure of economic health, labour market conditions play a central role in currency valuation. Strong employment, or low unemployment, supports consumer spending and economic growth, helping lift the domestic currency’s value. A particularly tight labour market can also influence inflation and monetary policy. When too few workers are available to fill vacancies, limited labour supply and strong demand push wages higher.

Wage growth: why does it matter?

For policymakers, the rate of wage increases is a crucial economic indicator. Rapid pay growth gives households more money to spend and usually pushes up consumer goods prices. Unlike more volatile inflation drivers, including energy prices, wage increases are unlikely to be reversed. Wage growth is therefore viewed as a major source of underlying, persistent inflation. Central banks worldwide scrutinise wage data when setting monetary policy.

Employment: how much weight do central banks give it?

A central bank’s objectives determine how much emphasis it places on labour market conditions. For some, an explicit employment mandate sits alongside the task of controlling inflation. The US Federal Reserve (Fed), for instance, has a dual mandate to promote maximum employment and stable prices. By contrast, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Regardless of their specific mandates, policymakers consider labour market conditions important because they indicate economic health and have a direct relationship with inflation.