The number of initial jobless claims in the US fell to 206,000. The job market was stable, but PPI rebounded beyond expectations

The Zhitong Finance App learned that data released by the US Department of Labor on Thursday showed that the number of people applying for unemployment benefits in the US for the first time declined slightly last week, indicating that corporate layoffs are still low and continue to provide solid support for the US labor market. However, driven by a recovery in energy costs and service prices, the newly announced August Producer Price Index (PPI) rose 0.4% month-on-month and 5.4% year-on-year, exceeding market expectations. As front-end production-side inflation becomes sticky again, the market focus has completely shifted to the consumer price index (CPI) to be released tomorrow evening. Inflation data is becoming a key factor in determining the Federal Reserve's interest rate decision next week.

According to the data, for the week ending September 5, the number of initial jobless claims in US states decreased by 1,000 to 206,000 after seasonal adjustments. Since mid-July, the number of initial jobless claims has been locked in a narrow range of 189,000 to 212,000.

This high-frequency data is highly consistent with the August non-farm payrolls report released earlier. According to government data, the number of non-farm payrolls surged by 162,000 in August, the biggest increase in five months, while the unemployment rate remained unchanged at 4.1%. The two data confirm each other, showing that the US labor market is gradually stabilizing after experiencing a phased slowdown in late spring and summer, and companies lack the will to lay off workers on a large scale.

However, there is still structural stickiness within the labor market. As of the week ending August 29, the number of renewed jobless claims dropped slightly by 1,000 to 1.774,000. The median long-term unemployment rate is still close to a four-and-a-half-year high, indicating that the cycle of re-employment of the unemployed has lengthened, and the pattern of “low layoffs and slow recruitment” continues.

Compared to the resilience of the labor market, the risk of inflation, which has recently risen again, makes the market even more urgent. As commodity and front-end costs rise, the market generally anticipates that the overall CPI increase for August announced tomorrow evening may reach 0.4% month-on-month (up about 3.4% year over year). Against the backdrop of no significant deterioration on the employment side, if the CPI data is also strong, it will significantly reduce market expectations for the Fed's subsequent policy easing.

On the eve of the Federal Reserve's decision, major overseas central banks have taken the lead. The ECB decided at its policy meeting on Thursday to raise the main refinancing rate by 25 basis points to 2.65%. Previously, the ECB kept interest rates unchanged in July, but this new rate hike highlights its determination to deal with ongoing inflationary pressure. The ECB's move has also intensified wait-and-see sentiment in the global market. Investors are waiting to closely evaluate whether the Federal Reserve will release a more hawkish policy signal next week against stubborn inflation.