US: Jobless Claims

Thu Jan 08 07:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 290K 280K to 297K 294K 298K 298K
4-week Moving Average - Level 290.50K 290.75K 290.75K
New Claims - Change -4K 17K 17K

Initial jobless claims fell 4,000 in the January 3 week to 294,000, helping to pull down the 4-week average slightly to 290,500. The average is trending about 10,000 lower than the month-ago comparison which points to steady improvement underway in the labor market.

Data on continuing claims, which are reported with a 1-week lag, are mixed. Continuing claims in the December 27 week rose a sizable 101,000 to 2.452 million but the 4-week average fell 17,000 to 2.397 million. This average has been steady around the 2.400 million mark since late November. The unemployment rate for insured workers is unchanged for a fourth week at a recovery low of 1.8 percent.

There are no special factors in today's report, one that should firm confidence for healthy readings in tomorrow's monthly employment report.

Market Consensus Before Announcement
Initial jobless claims during holidays are often wildcards for weekly data, a fact that will limit the effect of a sharp 17,000 rise in initial jobless claims in the December 27 week to 298,000. Despite the jump, the 4-week average held steady, up only fractionally to a 290,750 level that is still trending about 10,000 lower than a month ago in a comparison that points to strength for the monthly employment report. Continuing claims, which are reported with a 1-week lag, showed improvement in the December 20 week, down 53,000 to 2.353 million. The 4-week average fell 5,000 to 2.414 million.

New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility.

Jobless claims are an easy way to gauge the strength of the job market. The fewer people filing for unemployment
benefits, the more have jobs, and that tells investors a great deal about the economy. Nearly every job comes with
an income that gives a household spending power. Spending greases the wheels of the economy and keeps it
growing, so a stronger job market generates a healthier economy.

There's a downside to it, though. Unemployment claims, and therefore the number of job seekers, can fall to such
a low level that businesses have a tough time finding new workers. They might have to pay overtime wages to
current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because
of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets. Federal
Reserve officials are always on the look-out for inflationary pressures.

By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation looks threatening, it's a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked jobless claims and adjusted their portfolios to anticipate these events.

Just remember, the lower the number of unemployment claims, the stronger the job market, and vice versa.