US: Jobless Claims

Thu Dec 24 07:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
New Claims - Level 270K 267K to 275K 267K 271K 272K
4-week Moving Average - Level 272.50K 270.50K 270.75K
New Claims - Change -5K -11K -10K

Jobless claims, which had edged higher over the past few weeks, are moving back down, confirming that labor market conditions remain solidly favorable. Initial claims in the December 19 week fell 5,000 to a 267,000 level that hits the low-end Econoday estimate. The 4-week average, however, reflecting prior increases rose 1,750 to 272,500 which is only marginally above the month-ago trend.

Continuing claims, which also had been climbing, also came down, falling a very sharp 47,000 in lagging data for the December 12 week. The 4-week average for this reading also reflects prior increases, up 10,000 to 2.211 million. The unemployment rate for insured workers, after rising to 1.7 percent briefly, is back at 1.6 percent.

Though data for the holiday weeks are often volatile, they haven't been volatile this year. There are no special factors in today's report and no states were estimated.

Market Consensus Before Announcement
Initial jobless claims moved lower in the December 12 week, to 271,000 and down 11,000 from the prior week's 282,000 which was the highest since July. Forecasters see initial claims holding steady in the December 19 week, at a consensus 270,000. Note that readings in this report are often volatile during the holiday weeks.

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.