US: Jobless Claims

Thu Mar 24 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
New Claims - Level 268K 260K to 272K 265K 265K 259K
4-week Moving Average - Level 259.75K 268K 259.50K
New Claims - Change 6K 7K 6K

Indications from the jobless claims report are all lining up for another month of solid strength in the employment report. After having peaked in January near 280,000, initial claims have fallen back to the 260,000 area, at 265,000 in the March 19th week. The 4-week average, at 259,750, is trending slightly lower.

Data for continuing claims lag by a week and the available latest week, March 12th was the sample week for the March employment report. Continuing claims fell 39,000 in the week to 2.179 million with the 4-week average at 2.207 million, which when compared with the sample week of the February employment report shows a sizable 34,000 improvement.

Of special note! The latest reading for initial claims is the 55th straight under 300,000, the longest streak since 1973 when the workforce was by comparison much smaller. There are no special factors in today's report.

Also note that today's report includes revised adjustment factors going back to 2011.

Market Consensus Before Announcement
Initial jobless claims have been holding near record lows and are pointing to another month of solid employment growth. The Econoday consensus for the March 19th week is 268,000 vs 265,000 in the March 12th week. The March 12th week was the sample week for the March employment report and is also the reporting week for continuing claims in this report. Continuing claims, like initial claims, have been holding at historic 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.