US: Jobless Claims

Thu Dec 10 07:30:00 CST 2015

Consensus Consensus Range Actual Previous
New Claims - Level 270K 260K to 300K 282K 269K
4-week Moving Average - Level 270.75K 269.25K
New Claims - Change 13K 9K

Claims are up in the latest data, pointing perhaps to a softening of what has been a very solid labor market. Initial claims rose 13,000 to 282,000 which is 13,000 higher than the prior week and 12,000 over the Econoday consensus. This is also the highest reading since all the way back in July. But the 4-week average is steady, up only 1,500 to a 270,750 level that is only very slightly over the month-ago trend.

Continuing claims also show an unusual increase, up a very steep 82,000 in lagging data for the November 28 week to 2.243 million which is the highest reading since September. The 4-week average is up 16,000 to 2.183 million which is about 20,000 higher than the month-ago comparison. The unemployment rate for insured workers remains very low but is up 1 tenth to 1.7 percent for the highest reading since, again, back in September.

There are no special factors behind the increases though data for Louisiana, reflecting computer problems, were estimated for a third straight week. Claims remain very low but this report could raise early concern over the December employment report. This report next week will be very closely watched as the sample week for initial claims will match the sample week for the December report.

Market Consensus Before Announcement
Initial jobless claims have been trending at 42-year lows and, as a share of the whole labor market, are likely at record lows. For the December 5 week, Econoday forecasters see initial claims holding steady, up 1,000 to a still very low 270,000. Continuing claims have also been at record lows.

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 itgrowing, 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.