US: Jobless Claims

Thu Apr 09 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 285K 275K to 325K 281K 268K 267K
4-week Moving Average - Level 282.25K 285.50K 285.25K
New Claims - Change 14K -20K -21K

Periods surrounding the shifting holiday of Easter are always difficult to adjust for but trends in jobless claims, despite an expected bounce higher for initial claims in the April 4 week, are nevertheless favorable. Initial claims rose 14,000 in the week to 281,000 following a slightly revised decline of 21,000 in the prior week. But the 4-week average, which helps smooth out weekly bumps, is down for a 3rd straight week, 3,000 lower to a 282,250 level that is more than 20,000 below the month-ago reading. This is a sizable improvement and hints at bounce-back strength for the April employment report.

Continuing claims, where the reporting week lags by a week, are also pointing to improvement in the labor market. Continuing claims in the March 28 week fell 23,000 to 2.304 million which is a new recovery low. The 4-week average is also at a recovery low, down 27,000 to 2.361 million which is nearly 40,000 below the month-ago comparison. The unemployment rate for insured workers is unchanged at 1.7 percent for a second straight week which is also a recovery low.

There are no special factors in today's report, one that should help ease concern over any problems in the labor market following last week's very weak employment report for March.

Market Consensus Before Announcement
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. But there is a caveat in the latest 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.

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.