US: Jobless Claims

Thu Oct 29 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 265K 254K to 270K 260K 259K 259K
4-week Moving Average - Level 259.25K 263.25K 263.25K
New Claims - Change 1K 3K 3K

Initial claims rose only 1,000 in the October 24 week to a lower-than-expected 260,000 which is just off a 42-year low. The 4-week average continues to make new 42-year lows, down for a seventh week in row to 259,250. Initial claims, already at historic lows, appear to be trending even lower.

Continuing claims are also pointing to significant improvement. A sample-week to sample-week comparison with the September and October employment reports shows a large 100,000 decline in claims, from 2.244 million in the September 12 week to 2.144 million in the October 17 week. A comparison of 4-week averages shows a 77,000 decline to 2.175 million. The unemployment rate for insured workers remains at a very low 1.6 percent.

There are no special factors in the report, one that continues to point to very low levels of unemployment.

Market Consensus Before Announcement
Jobless claims are expected to rise slightly to 265,000 in the October 17 week, holding near a very impressive run of deep lows. For the last six months, claims have been signaling very tight conditions in the labor market and have been signaling even tighter conditions of late.

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.