US: Jobless Claims

Thu Oct 20 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
New Claims - Level 250K 240K to 255K 260K 246K 247K
4-week Moving Average - Level 251.75K 249.25K 249.50K
New Claims - Change 13K 0K 1K

Initial jobless claims moved higher in the October 15 week but the rise, up a tangible 13,000 to 260,000, is not due to the aftermath of Hurricane Matthew. The October 15 week was also the sample week for the October employment report and a comparison with the September sample week is mixed. The 260,000 level is up 9,000 from the September week but the 4-week average is 6,500 lower, at 251,750 vs 258,250. Results out of Florida, Georgia and South Carolina, the three states hit hardest by Matthew, show little change.

The tie breaker for the monthly employment report will have to be continuing claims but the results will have to wait until next week as this series is reported with a 1-week delay. And continuing claims are looking favorable, at 2.057 million in data for the October 8 week which is slightly below the month-ago trend.

Today's results will not raise expectations for strength in October employment but the sample-week gap is far from monstrous and levels for initial claims remain 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. The October 15 week is the sample week of the monthly jobs report and initial claims, seen little changed at 250,000, will offer the first hard indication on what the October employment report is likely to look like.

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.