US: Jobless Claims

Thu Dec 31 07:30:00 CST 2015

Consensus Consensus Range Actual Previous
New Claims - Level 270K 268K to 300K 287K 267K
4-week Moving Average - Level 277K 272.50K
New Claims - Change 20K -5K

Initial jobless claims unexpectedly jumped 20,000 to 287,000 in the December 26 holiday week, the highest level since the July 4 holiday week. The Econoday consensus expected an increase of 3,000 to 270,000. The 4-week moving average was up 4,500 to 277,000 in the December 26 week, the highest since the July 18 week. The level of continuing claims increased 3,000 to 2.198 million in the December 19 week. The seasonally adjusted insured unemployment was unchanged at 1.6 percent in the December 19 week. It should be noted that readings in this report can be volatile during the holiday weeks.

Market Consensus Before Announcement
Initial jobless claims have been holding little changed at historic lows. More of the same is expected for the December 26 week with the Econoday consensus at 270,000. Note, however, that readings in this report can be 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.