US: Jobless Claims

Thu Oct 08 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 271K 260K to 275K 263K 277K 276K
4-week Moving Average - Level 267.50K 270.75K 270.50K
New Claims - Change -13K 10K 9K

After holding at a long plateau at extremely low levels, initial jobless claims may now be breaking even lower to point to even less slack on the unemployment side of the labor market. Initial claims fell 13,000 in the October 3 week to 263,000 for the sharpest decline and lowest level in 2-1/2 months. The 4-week average is down 3,000 to a 267,500 level that is nearly 10,000 below the month-ago comparison which offers an early hint of strength for the October employment report.

Turning to continuing claims which are reported with a 1-week lag, claims rose 9,000 to 2.204 million in the September 26 week but the 4-week average is down 14,000 to 2.222 million. The average is at its lowest level in 4-1/2 months and is down more than 25,000 from the month-ago comparison. The unemployment rate for insured workers remains at a rock bottom 1.6 percent.

Estimates were made for South Carolina, which has been hit by heavy flooding, and Nevada submitted its own estimates. Otherwise there are no special factors in what is an especially standout claims report.

Market Consensus Before Announcement
Jobless claims are expected to fall back slightly to 271,000 in the October 3 week. For the past six months, claims have been signaling tight conditions in the labor market and have been offering the hawks their strongest arguments at the FOMC.

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.