"We're discounting this a little bit, only because some of this is just seasonal noise. The pace of layoffs hasn't changed that significantly in the last few months."
- Omair Sharif, a U.S. economist for RBS Securities
Following Federal Reserve comments the economy is improving, another portion of positive fundamental data reinforced the case the economy is strong enough to withstand the upcoming tapering of central bank's stimulus programme. Application for jobless benefits fell more than expected, hitting the lowest level in almost two months. As always on Thursdays, the Labor Department said unemployment claims plunged 21,000 in the week ended November 16, hitting 323,000, the lowest since September 28. Moreover, this is 3,000 less that excepted by analysts. Though this data may be interpreted as further evidence of healing labour market, last week included the Veteran's Day holiday, making adjusting the data for seasonal swings more challenging and may mask true picture.
Another report showed Thursday that wholesale prices dropped in October for a second straight month, suggesting inflation remains tame. The 0.2% drop in PPI followed a 0.1% fall in the preceding month, meeting analysts expectations. However, market reaction was limited, even despite stronger core PPI, as it was released a day after CPI, and these indicators are highly correlated.
While positive data from the labour market may force the Federal Reserve to start withdrawing its QE in December, sluggish demand that is keeping inflation under wraps, means that the Fed would stick to its stimulus programme at least through March.
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