US: Jobless Claims

Thu Apr 14 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
New Claims - Level 267K 253K to 280K 253K 267K 266K
4-week Moving Average - Level 265.00K 266.75K 266.50K
New Claims - Change -13K -9K -10K

In yet further confirmation of labor market strength, initial jobless claims fell a very sizable 13,000 in the April 9 week to 253,000. This matches the March 5 week for the lowest level since 1973 (a time when the size of the labor market was much smaller). The 4-week average shows less improvement, down only 1,500 to a 265,000 level that is slightly higher than the month-ago comparison and isn't pointing to new gains for the April employment report.

Continuing claims fell 18,000 in lagging data for the April 2 week to 2.171 million, a cycle low last matched in October last year. The 4-week average is down 10,000 at 2.178 million which is about 40,000 below the month-ago comparison and which does point to improvement. The unemployment rate for insured workers is unchanged at a very low 1.6 percent.

There are no special factors in today's report but there may be one in next week's report, that is the Verizon strike of 40,000 workers. Note that next week's reporting week for initial claims will be the April 16 week which is the sample week for the monthly employment report. Verizon aside, lack of unemployment is pointing to convincing strength for the labor market.

Market Consensus Before Announcement
Initial jobless claims the last several weeks have held rock steady near record lows. Forecasters see initial claims coming in unchanged at 267,000 for the April 9 week. Continuing claims have also been very positive, trending down to new record lows. Low levels of unemployment claims point to healthy demand for labor.

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.