US: Jobless Claims

Thu Oct 06 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous
New Claims - Level 256K 250K to 260K 249K 254K
4-week Moving Average - Level 253.50K 256.00K
New Claims - Change -5K 3K

Jobless claims keep moving lower and lower in what is definitive evidence of labor market strength. Initial claims in the October 1 week fell 5,000 to 249,000, breaking the 250,000 barrier for the second time this year. And the 4-week average, 2,500 lower at 253,500, is down for a very convincing 7th week in a row. Continuing claims are likewise moving lower, down 6,000 to 2.058 million in lagging data for the September 24 week. There are no special factors in today's report, one where all readings are at or near historic lows.

Market Consensus Before Announcement
Initial jobless claims have been tracking at historic lows and pointing to healthy conditions in the labor market. Continuing claims have likewise been very low. Forecasters see initial claims climbing but only slightly, up 2,000 in the October 1 week from the prior week's 254,000.

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.