US: Jobless Claims

Thu Nov 03 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous
New Claims - Level 255K 254K to 265K 265K 258K
4-week Moving Average - Level 257.75K 253.00K
New Claims - Change 7K -3K

Jobless claims are holding at or near record lows, with initial claims up only 7,000 in the October 29 week and continuing claims down 14,000 in the October 22 week. The 4-week average for initial claims, now at 257,750, has trended for the last two months in the 255,000 area. Continuing claims have likewise been trending lower, at a new record low of 2.026 million. There are no special factors in today's report where trends are pointing to strength in the labor market and suggest that employers are holding tightly onto their employees.

Market Consensus Before Announcement
Initial jobless claims have been tracking at historic lows and pointing to healthy conditions in the labor market, falling slightly in the October 22 week to 258,000. Forecasters see initial claims falling slightly once again, down 3,000 to 255,000 for the October 29 week.

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.