US: Jobless Claims

Thu May 07 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 280K 275K to 285K 265K 262K 262K
4-week Moving Average - Level 279.50K 283.75K 283.75K
New Claims - Change 3K -34K -34K

The labor market may have been improving following the sample period for tomorrow's employment report, a possibility hinted at from two straight weeks of unusually low readings for initial jobless claims. Claims came in at a much lower-than-expected 265,000 in the May 2nd week, holding on to nearly all their improvement in the prior week when they fell 34,000 to 262,000. Both the latest and the prior readings are far below the 296,000 reading in the April 18 week -- which was the sample week of the April employment report.

Many readings throughout the report are at 15-year lows including the 4-week average for initial claims, down 4,250 to 279,500.

Continuing claims data, reported with a week's lag, are also at 15-year lows including the level for the April 25 week of 2.228 million which is down 28,000 from the prior week. The 4-week average is also at a new 15-year low, down 20,000 to 2.272 million. The unemployment rate for insured workers is unchanged at 1.7 percent.

Continuing claims showed convincing improvement throughout April with improvement coming on strong for initial claims over the last two weeks. There are no special factors affecting the report, a strong one that will undoubtedly raise a lot of chatter among the hawks at the Fed.

Market Consensus Before Announcement
Initial jobless claims have been a highlight of the calendar, moving to 15-year lows and pointing to improvement underway in the labor market. Initial claims are expected to give back some of their improvement from the 262,000 level of the prior week, but not much with the Econoday consensus at 280,000. Continuing claims have also been moving lower to 15-year lows.

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.