Live Markets: Nesting dolls: Jobless claims, leading indicators

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NESTING DOLLS: JOBLESS CLAIMS, LEADING INDICATORS
Two discrete economic reports were released today. But one came nested inside the other. 
Starting with jobless claims, 194,000 US workers joined the line outside the unemployment office USJOB=ECI last week, 3.0% fewer than the week prior and 6,000 shy of consensus.
Ironing out weekly volatility, the four-week moving average drifts sideways just south of 200,000, hovering near multi-decade lows.
Combined with the most recent employment report—which delivered just under a third of the job gains analysts expected—along with recent JOLTS numbers and survey data, the labor market continues to idle in low-hire/low-fire mode amid economic and geopolitical uncertainties.
"Jobless claims remain exceedingly low, with the four-week moving average of both initial and continued claims more than ten percent below their prior year levels," writes Matthew Martin, senior US economist at Oxford Economics.
Still, this apparently healthy employment market has a downside: it frees the Federal Reserve to concentrate on elevated inflation.
"(It) will keep the Federal Reserve squarely focused on the inflation side of its mandate, prompting the Fed to raise rates by 25 bps at its October meeting," Martin adds.
On the other hand, ongoing jobless claims USJOBN=ECI, reported on a one-week lag, increased by 1.5% to 1.728 million, 8,000 more than economists predicted.
Despite the uptick, the metric has slowly drifted down to settle near its pre-pandemic "normal."
Even so, souring job confidence supports the low-hire side of that equation; workers are saying new gigs are becoming harder to find. 
"The low level of continuing claims only provides so much reassurance about the health of the labor market, given that they exclude the long-term unemployed and new entrants to the labor market," says Oliver Allen, senior US economist at Pantheon Macroeconomics. "With most indicators of hiring still very soft, those cohorts will find it difficult to attain a new job, suggesting the unemployment rate will creep up even if claims remain range-bound."
Here's the nesting dolls part: the initial jobless claims report is one of 10 forward-looking indicators amalgamated into the Conference Board's (CB) Leading Economic Index (LEI) USLEAD=ECI.
     The LEI showed no change in September, better than the anticipated 0.1% drop.
Other indicators included in the LEI are ISM new orders, building permits, Treasury yield spreads and S&P 500 price performance, among others.
"Five out of ten components made positive contributions to the LEI in September, led by the interest rate spread and average weekly hours in manufacturing," says Justyna Zabinska-La Monica, CB's senior manager of Business Cycle Indicators. "Nevertheless, these gains were offset by a large decline in consumer expectations and much smaller negative contributions from stock prices, new orders for capital goods and building permits."
"The LEI’s six-month growth rate increased slightly, which suggests the economy is still growing and will continue to grow, but is becoming less dependent on consumer spending and more dependent on business investment," Zabinska-La Monica adds.
Here's how the LEI stacks up against CB's consumer expectations index:
(Stephen Culp)
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MORNING BID: FRANCE'S DEBT STRAINS, AI IN FOCUS CLICK HERE
     

Initial jobless claims and Challenger layoffs https://www.reuters.com/graphics/USA-STOCKS/znvngmqezpl/initialclaims.png
Continuing claims and jobs confidence https://www.reuters.com/graphics/USA-STOCKS/moparobnnva/contclaims.png
LEI and consumer expectations https://www.reuters.com/graphics/USA-STOCKS/zjpqlmdqxvx/lei.png