US: Jobless Claims

Thu Feb 19 07:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 290K 270K to 305K 283K 304K 304K
4-week Moving Average - Level 283.25K 289.75K 289.75K
New Claims - Change -21K 25K 25K

Initial jobless claims fell a sizable 21,000 in the February 14 week to a slightly lower-than-expected 283,000, nearly reversing a 25,000 spike in the prior week. Volatility in weekly data puts importance on the 4-week average which is down for a 4th straight week, 6,500 lower to 283,250 that is the lowest level since early November.

Importantly, the February 14th week is the sample week for the monthly employment report and comparisons with the January sample week show significant improvement, down 26,000 for the level itself and down a very sizable 23,750 for the 4-week average.

Continuing claims, which are reported with a 1-week lag, rose 58,000 in the February 7 week to 2.425 million, but the 4-week average is down 10,000 to a 2.398 million level that was last matched in early December. The unemployment rate for insured workers remains at a recovery low of 1.8 percent.

There are no special factors in today's report, one that should lift expectations for another solid employment report.

Market Consensus Before Announcement
Initial 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.

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.