Last week, the number of initial jobless claims in the United States rose to the highest level in over a year, reflecting a significant increase in applications in Michigan and several states affected by Hurricane "Helene". Data released by the U.S. Department of Labor on Thursday showed that initial jobless claims for the week ending October 5 increased by 33,000 to 258,000, the highest since August 2023, with economists' median forecast at 230,000. Continuing jobless claims rose to 1.86 million in the previous week.

Meanwhile, the U.S. September CPI data released on Thursday exceeded expectations across the board, indicating a halt in the recent process of easing price pressures. The data showed that the U.S. overall CPI rose by 2.4% year-on-year in September, the sixth consecutive month of decline, slightly higher than the market expectation of 2.3%, but still the lowest year-on-year increase since early 2021, lower than the previous value of 2.5%; the U.S. overall CPI rose by 0.2% month-on-month in September, slightly higher than the market expectation of 0.1%, and in line with the previous value. The core CPI, which is considered to better reflect underlying inflation, also exceeded market expectations. The U.S. core CPI rose by 3.3% year-on-year in September, the highest since June, higher than the market expectation of 3.2%, and in line with the previous value; it rose by 0.3% month-on-month, also higher than the market expectation of 0.2%, and in line with the previous value.

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Vital Knowledge analyst Adam Crisafulli said that after the CPI report was released, although the knee-jerk conclusion is negative (bad employment + rising prices = stagflation), the Federal Reserve is unlikely to have a "drastically different" view after this report. Given that the FOMC's rhetoric has recently turned positive towards employment, Powell and his colleagues may spend more effort assessing the initial claims data rather than CPI. In addition, the slowdown in housing inflation is a potential positive development.

Next month's employment data will be the focus of the Federal Reserve's easing policy. After the CPI and initial jobless claims were announced, Whitney Watson, Global Co-Head of Fixed Income and Liquidity Solutions and Co-Chief Information Officer at Goldman Sachs, said: The September CPI report was stronger than expected, with core CPI rising unexpectedly. However, labor market data remains the dominant factor for the Federal Reserve, and we believe that next month's employment data will be a more important data point in determining the pace and extent of the Federal Reserve's easing.

After Hurricanes "Helene" and "Milton", there may be continued fluctuations in initial jobless claims, complicating the Federal Reserve's efforts to accurately measure the potential development of the U.S. labor market. Due to the destruction of the storms, many people in the southeastern United States are unable to work, and some may also find it difficult or delayed to apply for unemployment benefits.

Analyst Edward Harrison said that last week's U.S. non-farm employment report was the last clean data before the next FOMC meeting, as subsequent data will be affected by strikes and hurricanes. Today's unemployment claim data confirms this. However, the bond market does not know how to react, fluctuating due to high inflation data offsetting the impact of the number of unemployment claims. However, over time, yields may rise as both core and overall inflation are higher than expected.

After the data was released, institutional analysis showed that traders slightly increased their bets on a 25bp rate cut by the Federal Reserve in November, but they have not fully digested this. A series of U.S. data sent mixed signals, with traders weighing labor market concerns against sticky inflation, trying to judge which one the Federal Reserve will prioritize. The knee-jerk market fluctuations highlight the risk of assessing based on a single initial jobless claims data, especially considering the recent strong performance of the non-farm employment report.