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Weekly Jobless Claims Drop Significantly

Weekly Jobless Claims Drop Significantly.

This story originally appeared on Zacks

Pre-market futures remain in the green, following the best stretch across market indexes we’ve seen in two months. Fresh off new closing highs across the board, we currently see the Dow +4 points, the S&P 500 +6 points and the Nasdaq +50. If it’s looking like the rally in the Dow and S&P are getting a little long in the tooth, that may be right; the S&P has only posted two down days since October 12th. Though the tech-heavy Nasdaq still looks ready for action.

New weekly jobless claims are helping keep the mood buoyant: Initial Jobless Claims have now hit a new post-Covid low 269K — down for the fifth straight week and closer to the 225K per week levels we’d seen prior to the pandemic. This follows the slightly upwardly revised 283K, which itself was a post-Covid low. This is the right direction to be heading, even if some of this drop-off in new claims has to to with seasonal holiday hiring, which would be expected to fall away in early 2022.

Continuing Claims also reached a post-Covid low to 2.105 million two weeks ago (longer-term claims report a week in arrears from new claims), from a slight downward revision the previous week to 2.239 million. As with the Initial Claims looking to reach the 200-225K mark of 2019, so Continuing Claims are looking at sub-2 million to get themselves situated back to those historically healthy claims numbers.

This also provides a good narrative for the stalling we’d been seeing in the labor market overall during the past six months or so — that employees are not being drawn back into their old jobs at the same wage rates and conditions. These new post-Covid lows on both new and longer-term claims suggest some traction has been made here. Also see yesterday’s ADP ADP private-sector payroll report and look toward tomorrow’s nonfarm payrolls from the U.S. government, where 450K new jobs are expected to have been created last month, more than double the 194K we saw from September.

Q3 Productivity dropped rather precipitously this morning, -5.0% from a +2.1% posted the previous quarter. These are seasonally adjusted, annualized units of nonfarm productivity, where the expectation was for a read of -3.2%. For comparison, in Q2 of 2020 we saw a huge jump in productivity to +11.2%.

Unit Labor Costs for Q3 may provide much of the explanation here: +8.3%, up from an expected +7.4% and a big spike from the Q2’s downwardly revised +1.1%. So we can see this wage growth is largely a Q3 phenomenon; though it’s taking a toll on near-term productivity, improvements in wages for the general workforce are positives according to the Fed, which yesterday finally announced a start to the tapering of asset purchases.

The International Trade Deficit for September hit an all-time record depth of -$80.9 billion — a big step down from the upwardly revised -$72.9 billion posted for August. Although we are at a low point historically (and up until the mid-1970’s, this read was always at or near zero), it’s still a tick better than the -$81.0 billion expected. Imports jumped to an all-time high while exports lagged. This may be seasonally related to the upcoming holiday season, as well.

Moderna MRNA shares have fallen -14.4% in today’s pre-market, on big misses to its Q3 earnings report. Earnings of $7.70 per share on $4.97 billion in sales were way off the mark of $8.96 per share and $6.05 billion expected, respectively. These amount to negative surprises of -14% and -17.8%, respectively.

While no one doubts the strength in the company’s Covid vaccine, Moderna is now dealing with pharmaceutical production and distribution on a scale well beyond its past history. Also, the company’s stock had been up +231% year to date; this big Q3 miss may bring shares back down from the nosebleeds.

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