US: Jobless Claims

Thu Nov 17 07:30:00 CST 2016

Consensus Consensus Range Actual Previous
New Claims - Level 257K 255K to 262K 235K 254K
4-week Moving Average - Level 253.50K 259.75K
New Claims - Change -19K -11K

There are no special factors and no states were estimated in a very sharp drop for initial jobless claims, down 19,000 in the November 12 week to a far lower-than-expected 235,000. The November 12 week was also the sample week for the monthly employment report and a comparison with the October sample week shows a very substantial 26,000 decrease in the headline level but a small increase in the 4-week average, the latter at 253,500 for the latest reading vs 252,000 in the October week. Continuing claims, in lagging data for the November 5 week, are also substantially lower, down 66,000 and below 2 million at 1.977 million. Readings throughout this report are at or near historic lows to indicate that employers are holding tightly onto their employees.

Market Consensus Before Announcement
Initial jobless claims are expected to rise a very slight 3,000 to 257,000 in the November 12 week which is also the sample week for the November employment report. A sharper-than-expected decline would be a favorable sign for the November report while a sharp rise would be unfavorable. Both initial claims and continuing claims have been tracking at historic lows all year and pointing to healthy conditions in the labor market.

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.