I expect a nervous market as investors and traders look ahead to Thursday’s weekly report on initial claims for unemployment and Friday’s report on the jobs numbers for November.
The curent rally is assumes a Goldilocks economy–not so weak that we’re worried about a recession and not so hot that the Federal Reserve will raise interest rates again (unlikely) or hold off on cutting rates. (The market’s current consensus, according to prices in the swaps markets, is a 50% chance of a cut in rates at the March Fed meeting and 100% certainty of a cut at the May meeting–the worry is that this schedule might be too aggressive.)
The initial claims report for the week ended November 25 showed 218,000 workers applying for unemployment for the first time. That was up 7,000 from the prior week. The four-week moving average at 220,000, however, dipped by 500 claims from the prior week. Economists are looking for an initial claims number at something like this level. Hold hiring and the end of the auto strike may make it hard to interpret this report.
Friday’s jobs report–the employment situation report–is the biggie this week. In October the economy added a seasonal adjusted 150,000 jobs. That was extremely close to the 153,000 economists had projected. The unemployment rate ticked up to 3.9%, higher than its been since February 2022. It’s likely that will see some uptick in this number due to the end of the auto strike. In October the economy lost 35,000 jobs in the manufacturing sector and 33,000 of tht was in the auto sector.
The market is looking for something less than 200,000 jobs again to show that the economy continues to slow–but not by too much. A tick up in the unemployment rate to 4% might be enough to give those still looking for a recession some pause, of course.
There’s a good chance that Goldilocks will deliver again. But just enough doubt to make financial markets nervous ahead of there numbers.
