Citi: US Initial Jobless Claims Remain Low, but Hiring Is Decelerating
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Citi notes that US initial jobless claims remain low, indicating layoffs have not materially increased. For the week ending June 27, initial claims were 215,000, almost unchanged from the prior 216,000. The four-week moving average edged down to 222,000. However, the marginal uptick in June claims aligns with slowing employment growth for the month. Meanwhile, continuing claims for the week ending June 20 rose slightly to 1.814 million, with the four-week average increasing to 1.803 million. Citi believes the rise in continuing claims primarily reflects a slowdown in hiring rather than a surge in layoffs, meaning it takes longer for unemployed individuals to find new work. This dynamic is consistent with a labor market characterized by low layoffs but slower hiring. For the Federal Reserve, the currently low level of initial claims should provide comfort that the labor market is not deteriorating sharply, supporting a patient policy stance. However, if initial claims continue their upward trajectory, it would reinforce Citi's expectation of softer summer employment data and potentially shift the policy dialogue toward a more dovish outlook. Furthermore, the report cautions that the unemployment rate has been temporarily depressed by declining labor force participation. If participation rebounds, the unemployment rate could rise, potentially exposing more underlying labor market slack.
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