US: Jobless Claims

Thu May 21 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 270K 265K to 280K 274K 264K 264K
4-week Moving Average - Level 266.25K 271.75K 271.75K
New Claims - Change 10K -1K -1K

Claims levels remain extremely low and are signaling a significant lack of layoffs in the labor market. Initial claims did edge up in the May 16 week but not by much, 10,000 higher to 274,000 which follows 3 straight weeks in the low to mid 260,000 range. This is the lowest trend for initial claims since 2000.

The 4-week average is down for a 4th straight week, 5,500 lower to a 266,250 level which is more than 20,000 lower than the comparison with the April 18 week. The May 16 week to April 18 week comparison offers a sample-week to sample-week look at the monthly employment report, and the 4-week average is pointing to major improvement.

Continuing claims are also pointing to improvement, down 12,000 to 2.211 million in lagging data for the May 9 week with the 4-week average down 29,000 to 2.230 million. The unemployment rate for insured workers is down yet another notch to 1.6 percent. These are all the best readings in 15 years.

There are no special factors in today's report, one where trends belie what has been no more than moderate growth in payrolls. Whether they are hiring or not, employers, based on claims data, are holding onto the employees they have.

Market Consensus Before Announcement
Initial jobless claims are at rock bottom and are strongly signaling that employers are holding onto their employees. The three prior weeks for initial claims came in at the low 260,000 level, a 15-year low and one of the very lowest stretches in the long history of the series.

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.