Lowest Unemployment in 57 Years. That’s Not Good News for Your Portfolio
U.S. jobless claims fell to their lowest level since 1969, and the market shrugged. Behind the record is a frozen labor market that gives the Fed a free hand to raise rates further. For growth stocks, that’s worse news than it seems.
Key points
Initial jobless claims fell to 194,000, their lowest level since 1969, and the Nasdaq lost over 2% that day
Just 29,000 jobs were created in September instead of the expected 84,000, and unemployment still rose
The equity risk premium fell below 1 percentage point; the historical average is around 3.5 points
Meta announced capital expenditures of up to 145 billion dollars on AI, and its stock fell 6% after earnings
The 230,000 weekly claims threshold separates the scenario in which the Fed keeps tightening from the one in which it has to back down
A number that would be cause for celebration in any other year
On Thursday, October 22, the U.S. Department of Labor reported that the number of new jobless claims fell by 6,000 to 194,000 in the week ending October 17. Economists had expected 200,000. The four-week average, which smooths out weekly fluctuations, fell to 197,750, and claims have stayed at or below 200,000 for six weeks in a row. The last time they were this low was in September 1969, when the U.S. labor force was roughly half its current size.
In any other year, a number like that would be cause for celebration. People aren’t losing their jobs, they’re spending, companies are selling, and profits are growing. This time, the market shrugged. Bonds barely moved, and stocks were focused on completely different things: oil and Meta’s earnings. The Nasdaq lost over 2% that day.
The historically strongest labor market failed to excite anyone, and that’s no coincidence. Look at what lies behind the record, and you’ll find that for your portfolio, it’s more of a warning than good news.