US: Jobless Claims

Thu Nov 05 07:30:00 CST 2015

Consensus Consensus Range Actual Previous
New Claims - Level 262K 256K to 270K 276K 260K
4-week Moving Average - Level 262.75K 259.25K
New Claims - Change 16K 1K

Initial claims shot 16,000 higher in the October 31 week but still remain very low, at 276,000. The 4-week average rose 3,500 to 262,750. There were no special factors in the week.

Continuing claims, where data lag by a week, rose 17,000 to 2.163 million. The 4-week average is down 11,000 at 2.162 million. The unemployment rate for insured workers is unchanged at 1.6 percent.

The rise for initial claims is unexpected but would have to be repeated in subsequent weeks before downgrading what is still a very favorable outlook for the unemployment side of the labor market.

Market Consensus Before Announcement
Jobless claims are expected to hold near a long run of deep and impressive lows, at a consensus 262,000 in the October 24 week. Claims have been signaling very tight conditions in the labor market for the last six months and are now signaling even tighter conditions still.

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.