US: Jobless Claims

Thu Dec 08 07:30:00 CST 2016

Consensus Consensus Range Actual Previous
New Claims - Level 255K 250K to 262K 258K 268K
4-week Moving Average - Level 252.50K 251.50K
New Claims - Change -10K 17K

Outside of year-end volatility the last few weeks, unemployment claims remain very low and consistent with strong demand for labor. At 258,000 in the December 3 week, initial claims fell 10,000 to extend a run of 5 straight double-digit weekly swings. Before this run, there was only one double-digit change going back to July. Bumpy periods increase the importance of the 4-week average where change is dampened, up only 1,000 in the week to a 252,500 level that is nearly 10,000 below the month-ago comparison in what is a very early hint of strength for the next employment report. Continuing claims, in lagging data for the November 26 week, are also down, 79,000 lower to 2.005 million. There are no special factors in today's report.

Market Consensus Before Announcement
Initial jobless claims have been up and down the past several weeks and are expected to fall back 13,000 in the December 3 week to an in-trend 255,000. Initial claims as well as 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.