US OUTLOOK/OPINION: Challenger To Boost Sensitivity To Jobless Claims Increases

A sharp rise in layoff announcements in the Challenger report should increase sensitivity to the weekly claims data, which for now see initial claims at healthy levels. We watch for any softening in tone from today's heavy Fedspeak schedule. 

• The October Challenger report confirmed the low hiring state of the labor market but will also start to see greater questions on the low firing characterization in place for some time.
• Initial jobless claims data have clearly been evidence of low firing, including most recently with state-level data suggesting nationwide initial claims at just a seasonally adjusted 219k per MNI calculations in latest data to the week to Oct 25. That’s close to the average through 2019 when the unemployment rate had a 3-handle although clearly re-hiring conditions are softer now as evidenced by continuing claims and broader labor data.
• Today’s jump in forward-looking layoff announcements should see greater sensitivity to increases in the weekly claims data, starting with today’s state-level data this afternoon (we believe ~1700ET), something likely needed to drive a stronger market reaction. Indeed, Powell noted as such at last week's press conference (excerpt below).
• It will be interesting to hear whether today’s weak Challenger report is acknowledged in today’s deluge of Fedspeak (in chronological order from Williams, Barr, Hammack, Waller, Paulson and Musalem). Waller is clearly the most dovish of those speakers and has warned on risks to the labor market, but such comments would still be notable as it would go against the topic of central banking and payments. Most impactful though should be any softening in tone from hawks Musalem (’25 voter) and Hammack (‘26).

• Fed Chair Powell when asked about big layoff announcements coming from Amazon and others: "So those are -- those are both things that we're watching very -- very, very carefully. To start with the layoffs, you're right, you see a significant number of companies either announcing that they are not going to be doing much hiring, or actually doing layoffs, and much of the time they're talking about AI and what it can do. So, we're watching that very carefully. And yes, it could absolutely have implications for job creation. We don't really see it in the initial claims data yet. Now, it's not a surprise that we don't, it takes some time for it to get in there, but we're watching that really carefully. But again, don't see it yet in the -- in the initial claims data."

• Some further context on the then lack of a big spike in layoffs from Chicago Fed’s Goolsbee on Monday, a ’25 voter typically at the dovish end of the FOMC spectrum but who has also been recently cautioning on still stubborn inflation. He sees a higher threshold for cutting in Dec than last month: “If you look over the last 12 months, the unemployment rate has not been going up. We haven't seen a big uptick in layoffs, which, if this were the beginning of recession or deterioration of the labor market, that was rapid, you would expect to see higher layoffs or firing and we haven't seen that. There's still concerns on that side. I'm not decided going into the next meeting. I want to see how things are playing out. I do think the public announcements of layoffs you would expect, if that is an immediate business cycle-driven matter that you would start to see an uptick in the official unemployment insurance statistics or the layoff statistics, or you would get WARN Act type data of that form that would give you a little bit of a heads up of what was coming in the job market. I do think the hiring rate is low. That's among the weakest things in the economy at the moment.”