US: Jobless Claims

Thu Apr 02 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 285K 275K to 295K 268K 282K 288K
New Claims - Change -20K -9K -5K
4-week Moving Average - Level 285.50K 297.00K 300.25K

Initial jobless claims fell very sharply in the March 28 week, down 20,000 to 268,000. Next to 267,000 in the January 24 week this year, this is the lowest reading since all the way back in April 2000. The big drop pulls the 4-week average down an unusually steep 14,750 to 285,000 which is the lowest reading since November last year.

Continuing claims, reported with a 1-week lag, are also pointing to improvement. Continuing claims in data for the March 21 week fell a very steep 88,000 to a new recovery low of 2.325 million. The 4-week average is down 20,000 to 2.388 million which is the lowest reading since February. The unemployment rate for insured workers is down 1 tenth to a new recovery low of 1.7 percent.

But there is a caveat in today's report and that is seasonal adjustment tied to Easter which is a difficult holiday period to adjust for given its year-to-year calendar shifts. Still, today's report is a positive for the jobs outlook and may ease concern, ever so slightly, of weak readings in tomorrow's March employment report.

Market Consensus Before Announcement
Initial jobless claims fell sharply in the March 21 week but the latest 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.

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.