US: Jobless Claims

Thu Dec 29 07:30:00 CST 2016

Consensus Consensus Range Actual Previous
New Claims - Level 262K 250K to 265K 265K 275K
4-week Moving Average - Level 263.00K 263.75K
New Claims - Change -10K 21K

Initial jobless claims fell back as expected in the December 24 week, down 10,000 to 265,000 with the 4-week average down slightly to 263,000. Holidays often make for anomalies in this series including the latest week when an unusually large number of states, 10 in total, had to be estimated. This raises the risk of a sizable revision in the next report.

Continuing claims, in lagging data for the December 17 week, rose a noticeable 63,000 to 2.102 million though the 4-week average is up only slightly at 2.042 million. The unemployment rate for insured workers is unchanged at a very low 1.5 percent.

Readings throughout this report, in fact, are very low notwithstanding the large number of estimates for initial claims. Still, initial claims did move sharply higher in the prior week (up 21,000 in the December 17 week which was also the sample week of the monthly employment report) and remain a negative signal for next week's employment data for December.

Market Consensus Before Announcement
Initial claims have been volatile week-to-week but have been trending higher compared to November in what is an unfavorable indication for the December employment report. Forecasters see claims in the December 24 week reclaiming more than half of the prior week's 21,000 surge, falling 13,000 to a consensus 262,000. The recent rise aside, claims data, including continuning claims, remain at or near historic lows and consistent with a strong 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.