According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance shrank to 215K for the week ending June 27. The latest print came in below initial estimates (220K) and was slightly lower than the previous week’s 216K (revised from 215K).
Additionally, the 4-week moving average went down by 2.5K, bringing it to 222K from the revised average of the previous week (224.5K).
The report also indicated that Continuing Jobless Claims increased by 2K to 1.814M for the week ending June 20.
What do US Initial Jobless Claims figures mean for the US Dollar?
The Greenback reverses two daily advances in a row, breaking below the key 101.00 support to hit fresh multi-day lows when gauged by the US Dollar Index (DXY) on Thursday.
The move lower in the US Dollar (USD) comes as investors evaluate the latest US labour market report, while the sharp sell-off in USD/JPY also collaborates with the pullback.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
