US: Jobless Claims

Thu Oct 22 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 265K 245K to 270K 259K 255K 256K
4-week Moving Average - Level 263.25K 265.00K 265.25K
New Claims - Change 3K -7K -6K

Jobless claims are pointing to very tight conditions on the unemployment side of the labor market with initial claims coming in at a lower-than-expected 259,000 in the October 17 week, just up from the prior week's near 42-year low of 256,000. The 4-week average is at a new 42-year low, down 2,000 to 263,250. The October 17 week was also the sample week for October employment report and a comparison with the sample week of the September employment report shows improvement, down 5,000 with the 4-week average down a more tangible 9,250.

Continuing claims, where reporting lags by a week, are very healthy, up 6,000 to 2.170 million but with the 4-week average down 18,000 to 2.185 million. The unemployment rate for insured workers remains very low at 1.6 percent.

As a share of the ever-increasing labor market, current levels of jobless claims may very well be at record lows. There are no special factors in today's report, one that points to a continued improvement for, if not hiring and payroll growth, at least for the unemployment rate.

Market Consensus Before Announcement
Jobless claims are expected to rise slightly to 265,000 in the October 10 week, near its run of lows that include the prior week's 42-year low of 255,000. For the last six months, claims have been signaling very tight conditions in the labor market and have lately been signaling even tighter conditions.

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.