US: Jobless Claims

Thu Aug 11 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
New Claims - Level 265K 258K to 270K 266K 269K 267K
4-week Moving Average - Level 262.75K 260.25K 259.75K
New Claims - Change -1K 3K 1K

Jobless claims are steady at historically low levels pointing to a low rate of layoffs and strength for the economy. Initial claims edged 1,000 lower in the August 6 week to 266,000 with the 4-week average up 3,500 to a 262,750 level that shows very little change over the last several weeks.

Continuing claims rose 14,000 to 2.155 million in lagging data for the July 30 week. The 4-week average is unchanged at 2.143 million and is also nearly unchanged against recent comparisons. The unemployment rate for insured workers is unchanged at a near record low of 1.6 percent.

There are no special factors in today's report, one that offers the first hint for another month of strength in the August employment report.

Market Consensus Before Announcement
Initial jobless claims rose during the last half of July but not by much, pointing to a low rate of layoffs and strength for the economy. Initial claims are expected to inch back lower in the July 30 week, down 4,000 to 265,000 after rising a combined 17,000 in the prior two weeks. Seasonal layoffs tied to auto retooling are always a wildcard for weekly claims at this time of year though this year's effect, so far, has been limited.

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.