US: Jobless Claims

Thu Apr 23 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 286K 280K to 305K 295K 294K 294K
4-week Moving Average - Level 284.50K 282.75K 282.75K
New Claims - Change 1K 12K 12K

Trends in jobless claims are pointing to significant improvement for the April employment report. Initial claims were little changed in the April 18 week, up 1,000 to 295,000, but the comparison of the 4-week average, at 284,500, with the 4-week average one month ago shows an improvement of more than 20,000. This comparison matches the sampling weeks for the March and April employment reports.

Continuing claims, where reporting lags by a week, are also pointing to improvement. Continuing claims for the April 11 week did rise 50,000 to 2.325 million but the 4-week average is down 22,000 to a new 15-year low of 2.309 million. This reading is down a very convincing 99,000 from the month ago comparison. The unemployment rate for insured workers is unchanged for a 4th straight week at a 15-year low of only 1.7 percent.

There are no special factors in today's report though adjustments surrounding the shifting calendar for Easter are always tricky. Still, the trends in this report will likely raise expectations for a big snapback in the April employment report where the comparison against a very disappointing March is already very easy.

Market Consensus Before Announcement
Initial jobless claims rose 12,000 in the April 11 week to 294,000 vs a revised 282,000 in the prior week. But the 4-week average was little changed, up only fractionally to 282,750 which is nearly 25,000 below the month-ago comparison.

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 smooths 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.