US: Jobless Claims

Thu Feb 12 07:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 288K 275K to 300K 304K 278K 279K
4-week Moving Average - Level 289.75K 292.75K 293.00K
New Claims - Change 25K 11K 12K

Jobless claims data have been choppy week to week but the underlying trends are favorable. Initial claims rose 25,000 in the February 7 week to a higher-than-expected 304,000 but the 4-week average actually fell, down for a 3rd straight week to a 289,750 level that is about 10,000 lower than a month ago in what is a favorable comparison for the monthly employment report.

Continuing claims, which are reported with a 1-week lag, are also favorable. Continuing claims in the January 31 week fell 51,000 to 2.354 million while the 4-week average fell 19,000 to 2.404 million. The unemployment rate for insured workers is unchanged at a recovery low of 1.8 percent.

There are no special factors in today's report though data for Massachusetts, because of heavy snow in the state, were estimated.

Market Consensus Before Announcement
Initial jobless claims were up 11,000 to 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, has been trending right at the month-ago level. Continuing claims, reported with a 1-week lag, were also at healthy levels though the month-ago comparison was 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, was at a 2.421 million level that is slightly above the month-ago trend.

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.