US: Jobless Claims

Thu Mar 12 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 309K 292K to 320K 289K 320K 325K
4-week Moving Average - Level 302.25K 304.75K 306.00K
New Claims - Change -36K 7K 12K

Initial jobless claims fell a very steep 36,000 in the March 7 week to 289,000, driving down the 4-week average by 3,750 to a 302,250 level that, however, is more than 10,000 above the month-ago comparison. The month-on-month comparison does not point to improvement for the March employment report.

Continuing claims, which are reported with a 1-week lag, are mixed, down 5,000 in data for the February 28 week to 2.418 million but with the 4-week average up 13,000 to 2.417 million. The month-on-month comparison for the average is up 20,000, again not pointing to improvement for the labor market. 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, one that, despite the welcome decline in initial claims, will not be building up expectations for another strong monthly jobs report. Note that next week's report will cover, that is for initial claims, the survey week of the March employment report.

Market Consensus Before Announcement
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. 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.

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.