US: Jobless Claims

Thu Aug 20 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 270K 265K to 274K 277K 274K 273K
4-week Moving Average - Level 271.50K 266.25K 266.00K
New Claims - Change 4K 5K 4K

Jobless claims are steady at rock bottom lows and are pointing to continuing improvement on the unemployment side of the labor market. Initial claims came in at 277,000 in the August 15 week, up 4,000 from the prior week. The comparison of the August 15 week with the July 18 week, both the sample weeks for the monthly employment report, offers an early hint at what to expect for the August employment report. Here the comparison is negative, at 277,000 vs 255,000, but week-to-week data in July were heavily distorted by temporary layoffs for summertime factory retooling. A comparison of the 4-week averages, which smooths out week-to-week volatility, tells a different story, at 271,500 vs 278,500 to point to strength.

Continuing claims, where data lag by a week, fell 24,000 in data for the August 8 week to 2.254 million. The 4-week average is 9,000 higher at 2.265 million. The unemployment rate for insured workers remains at a very low 1.7 percent.

All these readings are very low indicating that employers, who may or may not be hiring, are definitely holding on to their employees. There were no special factors in the latest week.

Market Consensus Before Announcement
Initial jobless claims are expected to hold near record lows, at 270,000 in the August 15 week. The August 15 week is also the sample week for the monthly employment report which will add special scrutiny to the results.

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.