US: Jobless Claims

January 12, 2017 07:30 CST

Consensus Consensus Range Actual Previous Revised
New Claims - Level 255K 245K to 256K 247K 235K 237K
4-week Moving Average - Level 256.50K 256.75K 258.25K
New Claims - Change 10K -28K -30K

Jobless claims remain very low, at 247,000 for initial claims in the January 7 week vs Econoday expectations for 255,000. The prior week is revised 2,000 higher and, at 237,000, is only 4,000 above the cycle low hit in mid-November. The 4-week average is steady at 256,500 and, if there is no change in initial claims, looks to fall by 7,000 in the next reporting week.

Continuing claims fell 29,000 in lagging data for the December 31 week to 2.087 million which is also where the 4-week average is. The unemployment rate for insured workers remains at a very low 1.5 percent.

This time of year, given short holiday weeks, is always difficult to adjust for, yet the data continue to point to stable and healthy conditions in the labor market. Though 7 states for initial claims were estimated in the December 31 week and 10 in the prior week, revisions have been limited. Only one state, Virginia, was estimated in the current week.

Market Consensus Before Announcement
Initial claims had been trending higher in December before an outsized 28,000 decline in the December 31 week to 235,000. Forecasters see claims giving back most of the improvement with the consensus at 255,000 in what would be a 20,000 increase. Holiday volatility aside, claims data 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.