US: Jobless Claims

Thu May 14 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 276K 265K to 280K 264K 265K 265K
4-week Moving Average - Level 271.75K 279.50K 279.50K
New Claims - Change -1K 3K 3K

The highlight by far of the economic calendar right now remains jobless claims which are signaling very healthy conditions in the labor market. Initial claims fell 1,000 in the May 9 week to a 264,000 level that is just below the low estimate in the Econoday consensus. This is the 3rd week in a row that initial claims have been in the low 260,000 range which is a 15-year low and one of the best runs on record. There are no special factors in today's report.

The 4-week average is down 7,750, which is a steep decline for this reading, to a 271,750 level that is more than 10,000 below the month-ago trend and which offers an early indication of strength for the May employment report.

Continuing claims, which are reported with a week's lag, were unchanged in the May 2 week at a 15-year low 2.229 million. The 4-week average, down 12,000 to 2.260 million, is at a new 15-year low. The unemployment rate for insured workers is unchanged at 1.7 percent.

This report follows a soft labor market conditions index and JOLTS report earlier in the week not to mention last week's mostly soft employment report for April. Employers may not be hiring at a brisk rate but, judging by the data in this report, they are definitely holding onto employees.

Market Consensus Before Announcement
Initial jobless claims are the standout right now on the economic calendar. The two prior weeks for initial claims came in at the low 260,000 level, a 15-year low which if extended over the next several weeks would become the lowest stretch since the early 1970s. Another 260,000 reading for initial claims, even a 270,000 or maybe 280,000 reading, would send the hawks at the Federal Reserve scrambling.

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.