US: Jobless Claims

Thu Feb 05 07:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 290K 280K to 310K 278K 265K 267K
4-week Moving Average - Level 292.75K 298.50K 299.25K
New Claims - Change 11K -43K -42K

The jobs market is healthy based on jobless claims where initial claims, though up 11,000, came in at a much lower-than-expected 278,000 in the January 31 week, keeping the bulk of the improvement from the prior week's revised 42,000 fall. The 4-week average, down a sizable 6,500 in the week to 292,750, is trending right at the month-ago level in a comparison that points to another healthy monthly employment report for tomorrow.

Continuing claims, reported with a 1-week lag, are also at healthy levels though the month-ago comparison is less favorable. Continuing claims in the January 24 week rose 6,000 to 2.400 million while the 4-week average, though down 22,000, is at a 2.421 million level that is slightly above the month-ago trend. The unemployment rate for insured workers is holding at a recovery low of 1.8 percent.

There are no special factors in today's report, one headlined by the favorable print for the latest level of initial claims.

Market Consensus Before Announcement
Initial jobless claims the week of January 24 were down a shocking 43,000 to 265,000. This is the lowest reading since April 2000 but initial claims are often volatile coming off the Martin Luther King holiday (Monday, January 19). The 4-week average was down 8,250 in the week to a 298,500 level. Continuing claims, which are reported with a 1-week lag, fell a very sizable 71,000 in the January 17 week to 2.385 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.