US: Jobless Claims

Thu Jul 30 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 272K 270K to 275K 267K 255K 255K
4-week Moving Average - Level 274.75K 278.50K 278.50K
New Claims - Change 12K -26K -26K

Jobless claims remain at rock bottom levels, at a lower-than-expected 267,000 in the July 25 week vs an unrevised 42-year low of 255,000 in the prior week. The 4-week average is down 3,750 to a 274,750 level that is the lowest since mid-June.

Continuing claims, which are reported with a week's lag, rose 46,000 to 2.262 million while the 4-week average slipped 1,000 to 2.255 million. These are also very low readings. The unemployment rate for insured workers ticked 1 tenth higher to 1.7 percent.

There are no special factors in today's report though factory retooling often leads to volatility at this time of year. That aside, unemployment remains very low in this economy.

Market Consensus Before Announcement
Jobless claims are at extremely low levels, underscored by the startling 26,000 fall in the July 18 week to a 42-year low at 255,000. Even a sharp reversal in the July 25 week would not change the signals from this report, that the unemployment side of the labor market is very favorable.

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.