US: Jobless Claims

Thu Mar 05 07:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 300K 290K to 305K 320K 313K 313K
New Claims - Change 7K 31K 31K
4-week Moving Average - Level 304.75K 294.50K 294.50K

Initial jobless claims rose 7,000 to a much higher-than-expected level of 320,000 in the February 28 week. The increase lifts the 4-week average by a steep 10,250 to 304,750. The average is trending roughly 5,000 higher than a month ago in a comparison that does not point to improvement for the labor market.

Continuing claims, which are reported with a 1-week lag, are also moving higher, up 17,000 in data for the February 21 week to 2.421 million. The 4-week average is up 4,000 to a 2.404 million level that is slightly higher than a month ago in another comparison that does not point to improvement for the labor market. The unemployment rate for insured employees is unchanged at a recovery low of 1.8 percent.

Today's report is a disappointment but shouldn't affect expectations for tomorrow's employment report, a report that is not expected to show gains relative to January.

Market Consensus Before Announcement
Initial jobless claims surged unexpectedly in the February 21 week, up 31,000 to a 313,000 level. The 4-week average was up 11,500 to 294,500 but was still more than 10,000 below a month ago in a comparison that, despite the latest week's surge, still points to improvement for the labor market. Data on continuing claims, which are reported with a 1-week lag, were mixed. Continuing claims for the February 14 week fell 21,000 to 2.401 million but the 4-week average rose 2,000 to 2.399 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.