US: Jobless Claims

Thu May 04 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous
New Claims - Level 246K 245K to 250K 238K 257K
4-week Moving Average - Level 243.00K 242.25K
New Claims - Change -19K 14K

Week-to-week volatility has been pronounced but the trend in jobless claims is clearly favorable. Initial claims fell a very sharp 19,000 in the April 29 week to a 238,000 level that more than reverses the prior week's 14,000 jump and is 8,000 below the Econoday consensus. The 4-week average, after falling in the prior four weeks, is up only slightly to 243,000 which is nearly 10,000 below the month-ago trend in a comparison consistent with building demand for labor.

Continuing claims are also favorable, down 23,000 in lagging data for the April 22 week with this 4-week average down a sizable 18,000 to 1.989 million. The unemployment rate for insured workers (which excludes job leavers and re-entrants) is steady at a very low 1.4 percent.

There are no special factors in today's report, one that confirms strength in labor demand going into tomorrow's employment report for April.

Market Consensus Before Announcement
Jobless claims have been very low and pointing to unusually strong demand for labor. Forecasters sees initial claims coming in at 246,000 in the April 29 week and reversing the prior week's 14,000 rise to 257,000.

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.