Wage Growth Is Not Excessively Inflationary

Wage Growth – Jobless Claims & Job Cuts

Jobless claims and Challenger Job Cuts report didn’t match because one time layoffs boosted job cuts. The jobless claims report signals all is fine in the labor market. Number of claims fell from 216,000 to 214,000.

There wasn’t much of an effect on the labor market from hurricane Michael. Claims in Florida and Georgia fell about 4,500 combined. That reversed the 7,000 increase in the previous week.

Previous jobless claims report of 216,000 claims signals the October labor market report this Friday should be strong.

Continuing claims fell to 1.631 million and the 4 week moving average fell to 1.641 million. Both hit new 45 year lows.

The unemployment rate for insured workers is only 1.1%. Jobless claims report historically is very highly correlated with the stock market. It means the correction in stocks will end shortly. I am skeptical of the claims now. The labor market isn’t the strongest ever based on the prime age labor participation rate. This is even though the jobless claims to labor force ratio is at a record low.

However, in this case I strongly agree with the indicator. I think the correction in stocks wasn’t a sign a bear market is coming.

Wage Growth – The October Challenger Job Cut report disagrees with every other labor report reading.

As you can see from the chart below, it spiked 153.6% from last year. It increased from 55,285 to 75,644.

This spike was caused by Verizon’s layoff announcement. It offered voluntary severance packages to 44,000 managers to save $10 billion. The September report was skewed by the announcement from Wells Fargo to cut 26,000 jobs. That’s 10% of its workforce.

There was a similar spike in March caused by Toys R Us which announced 33,000 job cuts. I won’t change my opinion on the labor market. Certainly not because Verizon is trying to cut costs or because Wells Fargo is doing poorly.