US: Jobless Claims

January 19, 2017 07:30 CST

Consensus Consensus Range Actual Previous Revised
New Claims - Level 255K 252K to 260K 234K 247K 249K
4-week Moving Average - Level 246.75K 256.50K 257.00K
New Claims - Change -15K 10K 12K

In a solid signal of strength for the January employment report, initial jobless claims fell a very sharp 15,000 to a much lower-than-expected level of 234,000. The period covers the January 14 week which is also the sample week of the January employment report. A comparison of initial claims in the employment sample week for January with the sample week for December shows unusual improvement, down 41,000 from 275,000 in the December 17 week with the 4-week average down 17,000. There are no special factors in today's report, one that will raise talk of strength in the labor market.

Market Consensus Before Announcement
Week-to-week initial claims have been volatile during the holidays but still low and favorable. The January 14 week is the sample week for both the monthly payroll and household data and the results will offer an important gauge of what to expect for the January employment report. Forecasters see initial claims rising but only slightly to 255,000 from 247,000. If there's no change in the week, the 4-week average will fall a sizable and very favorable 7,000.

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.