U.S. initial jobless claims rose slightly last week but remained low; labor market resilience leaves Fed rate hike expectations unchanged.

U.S. initial jobless claims rose slightly but remained at a low level, continuing to highlight the resilience of the U.S. labor market. Data released by the U.S. Department of Labor on Thursday showed that initial jobless claims for the week ended Nov. 7 were 200,000, versus an expectation of 195,000, with the previous reading revised to 191,000 from 189,000. Continuing claims for the week ended Oct. 31 were 1.697 million, versus an expectation of 1.71 million, with the previous reading revised to 1.717 million from 1.718 million. The four-week average of initial jobless claims for the week ended Nov. 7 was 195,250, with the previous reading revised to 195,250 from 194,750. U.S. initial jobless claims remain near their lowest level since the 1960s, continuing to reflect the "low hiring, low firing" pattern in the U.S. labor market and, to some extent, echoing the U.S. October nonfarm payrolls data released last week. Data released by the U.S. Bureau of Labor Statistics on Nov. 6 showed that nonfarm payrolls increased by 165,000 in October, far exceeding the market expectation of 65,000 and also clearly above the average monthly increase of 48,000 over the past 12 months; the unemployment rate fell 0.1 percentage point to 4.1%, below the market expectation of 4.2%. The latest initial jobless claims data are one of the regular high-frequency data points ahead of the Federal Reserve's Dec. 8-9 policy meeting. After U.S. October CPI data released earlier this week broadly exceeded expectations, the market has fully priced in a 25-basis-point Fed rate hike in December (probability above 99%), and bets on a 50-basis-point Fed rate hike in December have also risen somewhat. Although the initial jobless claims data released on Thursday were slightly above expectations, they remain in a historically low range, and continuing claims fell rather than rose, so the marginal impact on December rate-hike pricing is expected to be limited. U.S. October PPI data to be released on Friday may be a more important data point affecting market expectations for Fed rate hikes. If the data show that inflationary pressures remain elevated, the market may further bet on a 50-basis-point Fed rate hike in December, especially given that Fed Governor Waller has previously said he could support a larger rate hike at the December policy meeting.