Surprising Jobless Claims Drop: Good or Bad? 🤔

What this means for my trading plan

Author

Jeff Williams
September 07, 2023

Good evening, Traders,

Today has been a data-intensive day and I'd like to share some insights into what the recent jobless claims report means for our trading strategies.

This morning, the U.S. Labor Department released its latest jobless claims report, surprising us with a significant drop of 13,000 claims, bringing the total to 216,000 for the week ending September 2. This figure marks the lowest level we've seen since mid-February and underscores robust hiring trends in the labor market.

In a typical scenario, a drop in jobless claims would be considered positive news. However, our current market context is anything but typical.

The unexpected decrease in jobless claims actually had a negative impact on the markets today. This seemingly counterintuitive reaction is due to the fact that it provides the Federal Reserve with more justification to raise interest rates in the upcoming months.

Many of you may be wondering what this means for my trading strategies.

Based on today's data, it is likely that the Fed will pause any immediate rate hikes in this month's meeting, emphasizing their need to see more data. However, the real concern lies in the November meeting, where I anticipate the Fed may feel compelled to raise rates again. Consequently, while we may observe a short-term market uptick, I will be watching for potential drops later this month as fears of rate hikes resurface.

Our Chief U.S. Economist at JP Morgan Chase, Michael Feroli, has emphasized the gradual easing in labor market conditions in last week's unemployment report for August, which aligns with today's jobless claims data.

In summary, despite the positive signs in the labor market, we must approach tomorrow's trading markets with a degree of caution. The current market pressures, combined with the Fed's evolving stance, make it imperative to stay informed and flexible in trading strategies.

Thank you for reading and here’s to your success,

P.S. If you feel you might have a credit or just have a general question, please give Jeff Brown a call at 443-870-4406 or you can email him at [email protected].

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