Weekly applications for unemployment benefits fell to one of the lowest levels since the COIVD pandemic last week, Commerce Department data indicated Thursday, setting up the potential for a stronger-than-expected payroll later this week that could trigger changes to the Federal Reserve's bond purchase program.
Applications for the week ending on October 2 were pegged at 326,000, down from the prior period's upwardly-revised total of 364,000 and firmly ahead of the Street consensus forecast. The post-pandemic low remains at 310,000, recorded over the week of September 9.
The four-week average edged modestly higher, to 344,000 while continuing claims also declined to 2.714 million.
The Bureau of Labor Statistics will publish its official nonfarm payroll report Friday, with economists looking for a headline total that represents around 475,000 new jobs, a rebound from the disappointing tally of 235,000 in the month of August.
Payroll processing group ADP said yesterday in its National Employment Report, which it compiles with Moody's Analytics, that private sector jobs grew by 568,000 in September, well ahead of the Street consensus forecast of a 428,000 total, as blue-chip companies such as Amazon (AMZN) - Get Amazon.com, Inc. Report and Walmart (WMT) - Get Walmart Inc. Report ramp-up hiring plans into the holiday season.
Fed Chairman Jerome Powell told reporters last month that it wouldn't take a knockout or super-strong employment report," to begin slowing the pace of purchases, which analysts suggest could last for around 8 months before the entire program is exhausted.
"One of the key market worries is rising rates, with the Fed widely expected to start tapering its bond purchases by the end of the year," said Brad McMillan, chief investment officer for Commonwealth Financial Network. "A weak jobs report would reduce the chances of that, and markets would likely cheer signs of continued monetary stimulus."
"From an economic standpoint, a report under 400,000 new jobs would be a sign of worry," he added. "From a market perspective, however, while it would likely create some volatility, it could turn into a source of longer-term support."
U.S. equity futures were modestly firmer following the data release, with contracts tied to the Dow Jones Industrial Average indicating an opening bell gain of 315 points and those linked to the S&P 500 priced for a 42 point move to the upside.
Benchmark 10-year Treasury bond yields, meanwhile, were little-changed at 1.536%, while the dollar index was pegged 0.05% lower against a basket of its global peers at 94.168.