US: Jobless Claims

Thu Dec 17 07:30:00 CST 2015

Consensus Consensus Range Actual Previous
New Claims - Level 270K 260K to 278K 271K 282K
4-week Moving Average - Level 270.50K 270.75K
New Claims - Change -11K 13K

Jobless claims are low and are pointing to stable and healthy conditions in the labor market. Initial claims, which did spike higher in the prior week, fell back sharply in the December 12 week, down 11,000 to 271,000 which makes for little change in the 4-week average at 270,500. Importantly, the December 12 week is the sample week for the December employment report and a claims comparison with the sample week of the November employment report shows virtually no change in either the weekly level or the 4-week average.

Continuing claims, where data lag, fell 7,000 in the December 5 week to 2.238 million. Here the 4-week average has been rising, up 16,000 in the latest data to a 2.200 million level that is trending more than 30,000 above the month-ago comparison. The unemployment rate for insured workers is unchanged at 1.7 percent, a very low level but up 1 tenth from much of the third quarter.

There are no special factors in today's report though data for Louisiana, which is having computer troubles, was estimated for a fourth week in a row. Initial claims data in today's report should confirm expectations for another healthy month of employment growth, right in line with Federal Reserve expectations.

Market Consensus Before Announcement
Initial jobless claims moved higher in the December 5 week, to 282,000 for the highest reading since July. Continuing claims also rose, to their highest level since September. Still, levels in this report remain near historic lows. The December 12 week carries special importance as it is also the sample week for the monthly employment report. Econoday forecasters see initial claims falling back, down 12,000 to 270,000 in a result that would point to continued improvement for 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 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.