U.S. initial claims fell 9,000 to a lower-than-expected 363,000 level in the week ending October 27 from an upwardly revised 372,000 reading the previous week. The decline is encouraging and could be signaling the re-establishment of a modest downward trend that was interrupted by outsized volatility in the first and second weeks of October that reportedly resulted from difficulties seasonally adjusting the data around the beginning of the calendar quarter. The four-week moving average, which smooths out some of this weekly volatility, inched down to 367,250 from 368,750 the previous week. Continuing claims, for the week ending October 20, rose 4,000 to 3,263,000 from 3,259,000 the previous week.
In a separate report, U.S. private employment, as measured by the ADP employment report, rose 158,000 in October. This marks the first monthly release of new ADP data incorporating changes to the methodology that were announced last week along with historical revisions to the data. Historical revisions released last week resulted in downward revisions to employment growth in both September and August to 88,000 and 77,000 from 162,000 and 189,000 gains, respectively, as of the initial September report. With the release of the October data today, September’s gain is now revised back up to 114,000 and August’s previously reported 77,000 gain is now reported as 82,000.
Difficulties seasonally adjusting the weekly initial claims data around the first week of the calendar quarter were reportedly to blame for outsized volatility in the first two weeks of October. Readings over the last two weeks likely provide a cleaner reading and the tick down in the latest week provides at least some reason for optimism that the underlying pace of layoffs is slowing, albeit modestly.
According to analysts at RBC Economics, "the impact of today’s weekly claims report on expectations ahead of tomorrow’s official U.S. (Bureau of Labor Statistics) payroll employment report for October will likely be limited, given that the payroll survey was conducted earlier in the month; however, with that said, the four-week moving average of initial claims in the October payroll employment survey week at 366,500 was notably below the corresponding September reading of 378,500.
"We expect the slower pace of layoffs will be reflected in a 120,000 increase in tomorrow’s official October payroll employment report."
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