US: Jobless Claims

Thu Oct 15 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 270K 252K to 275K 255K 263K 262K
4-week Moving Average - Level 265.00K 267.50K 267.25K
New Claims - Change -7K -13K -14K

Jobless claims are settling in right at historic lows, continuing to point to a significant lack of slack in the labor market. Initial claims fell 7,000 in the October 10 week to 255,000 which matches the 42-year low posted in July. But as a share of the increasingly larger labor market, this level may very well be a record. The 4-week average is down 2,250 in the week to a 265,000 level which is also a 42-year low and more than 5,000 below a month ago in a comparison that offers an early hint of strength for the October employment report.

Continuing claims are telling the same story, down a very sizable 50,000 in lagging data for the October 3 week. The 4-week average is down 22,000 to 2.201 million and is about 50,000 lower than the month-ago comparison. These are at record lows for this series which, unlike initial claims, only goes only back about 15 years. The unemployment rate for insured workers is unchanged at a very low 1.6 percent.

There are no special factors in today's report, one that the hawks have been turning to since way back in March as a primary signal that wage pressures may be around the corner.

Market Consensus Before Announcement
Jobless claims are expected to rise slightly to 270,000 in the October 10 week, up from the prior week's unusual low of 263,000. For the past six months, claims have been signaling very tight conditions in the labor market.

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.