US Unemployment Applications Surge Last Week: Labour Market Losing Steam?

In some negative news for the US economy, it was reported that the number of Americans filing new claims for unemployment benefits rose sharply last week raising questions on whether the labour market in the United States was showing first signs of losing steam. Many analysts on the street, though attribute the sharp decline to temporary holiday factors. According to a report released by the US Labour Department, it was reported that applications for claims for unemployment benefit rose 20,000 to a seasonally adjusted 287,000. It is imperative to state that the applications were the highest level since July. The four week average which is considered to be a less volatile figure continued to remain near 42-year lows.

In other economic reports it was reported today that manufacturing activity in the Chicago area contracted at its fastest pace since July 2009 during the month in December raising questions over the US economic outlook. According to a report released by market research group Kingsbury International, it was stated that the Chicago purchasing managers’ index plunged by 5.8 points to a seasonally adjusted 42.9 in December as compared to a reading of 48.7 in November. Analysts on the street had expected the index to rise by 1.1 points to 49.8 in December.

Many analysts believe that the reports made many believe that the Federal Reserve might not hike interest rates any time soon which is a huge positive for equity and credit markets. It is imperative to state that the Federal Reserve had hiked interest rates for the first time by 0.25 percent at its December meeting. Many believe that the slowdown in the Chinese economy would continue to pose huge downside risks to the economy in the near term. Traders would be closely watching the release of key fourth quarter earnings report coming out of the US economy in the coming weeks to gauge the strength of US companies.