US: Jobless Claims

Thu Mar 26 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 293K 282K to 300K 282K 291K 291K
4-week Moving Average - Level 297.00K 304.75K 304.75K
New Claims - Change -9K 1K 1K

Initial jobless claims did fall sharply in the March 21 week but today's report isn't likely to raise expectations for the March employment report. Initial claims fell 9,000 in the week to 282,000, in turn driving down the 4-week average by a sizable 7,750 to a 297,000 level that, however, is still slightly higher than the month-ago comparison. Note that the sampling for the monthly March employment report was done in the prior week, the March 14 week, and sample-week to sample-week readings in that report between March and February were not favorable.

Continuing claims are reported with a 1-week lag and today's data do match the sample-week for the March employment report. But here the readings are mixed. Continuing claims for the March 14 week did move slightly lower, down 6,000 to 2.416 million and down slightly compared to the February sample-week of February 14. But the 4-week average, at 2.422 million, is 22,000 higher than the February sample-week.

There are no special factors skewing today's report, one that points to very healthy conditions in the labor market but not improving conditions.

Market Consensus Before Announcement
Initial jobless claims inched 1,000 higher in the March 14 week to 291,000 with the 4-week average up a modest 2,250 to 304,750. The latest week's data are of special importance given that the week is also the sample week for the March employment report. Comparisons with the sample week in February show a 9,000 rise (291,000 vs 282,000) but a steeper 21,750 rise for the 4-week average (304,750 vs 283,000).

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.