Treasury Yields Drop as Jobless Claims Grow Faster than Expected
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Treasury Yields Drop as Jobless Claims Grow Faster than Expected

Initial job claims rose faster-than-anticipated in the week ended Nov. 11, underscoring a slowdown in the US labor market. Treasury yields fell on the report.
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US Treasury Yields are in the red across the board on Thursday after the new jobless claims report showed that the labor market is cooling down. Rising claims show that interest rate hikes are making an impact to slow down the US economy, improving the outlook for a potential soft landing.

US Initial Job Claims Rise to 231,000

The number of jobless claims rose faster than expected last week, new data showed on Thursday.

According to the Labor Department, initial claims for state unemployment benefits increased by 13,000 to a seasonally adjusted 231,000 for the week that ended on November 11. The figure is higher than the consensus projection of 222,000.

The report, which represents the latest sign of a cooling US labor market, pushed US Treasury yields into the red. Notably, the yield on the 10-year Treasury fell to 4.46%, while 20- and 30-year yields slipped to 4.83% and 4.64%, respectively.

The number of Americans receiving benefits following an initial week of stimulus jumped by 32,000 to 1.86 million during the week ended November 4. These so-called continuing claims serve as a proxy for hiring and have been on the rise since September. 

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Interest Rate Hikes Doing Their Job

The latest jobless claim report points to a deceleration in the US labor market, which has been running red hot since last year.

The cooldown comes as 23-year high interest rates hinder demand. The Federal Reserve has delivered 11 rate hikes since March 2022, propelling them to the highest level since early 2001. Consequently, job growth slowed down in October, and the unemployment rate rose to 3.9%, marking a nearly 1-year high. 

The effects of the Fed’s hawkish policy were also reflected in the most recent consumer price index (CPI) report, which showed that the annual inflation rate eased to 3.2% in October. That reading was below the economists’ estimates of 3.3% and the September rate of 3.7%. 

Despite the robust 4.9% annualized surge in Q3 gross domestic product (GDP), economists predict a notable growth slowdown in the latest quarter. However, elevated consumer inflation expectations, fueled by rising gas prices and geopolitical uncertainties from conflicts in Ukraine and Gaza, add complexity to the matter. 

Simultaneously, investors are still hopeful that the Fed will begin cutting rates in 2024. Amidst this, prevailing optimism for the US to avoid a recession suggests a narrative of a potential soft landing for the world’s strongest economy.

The US economy appears to be the only global economy that may avoid a recession. What are your views on this? Let us know in the comments below.