US: Jobless Claims

January 26, 2017 07:30 CST

Consensus Consensus Range Actual Previous Revised
New Claims - Level 246K 244K to 250K 259K 234K 237K
New Claims - Change 12K 22K -15K -12K
4-week Moving Average - Level 245.50K 246.75K 247.50K

Holiday weeks often make for volatility in weekly jobless claims data, which appear to be the case for the January 21 week and the Martin Luther King holiday when initial claims jumped 22,000 to a higher-than-expected 259,000. Despite gain, the 4-week average moved slightly lower to 245,500.

Continuing claims in lagging data for the January 14 week rose 41,000 to 2.100 million with this 4-week average down slightly to 2.092 million. The unemployment rate for insured workers remains at a very low 1.5 percent.

Claims data, despite the holiday jump for initial claims, remain consistent with strong demand for labor and continue to trend below December comparisons which is a positive signal for next week's January employment report.

Market Consensus Before Announcement
Initial jobless claims fell a sharp 15,000 to 234,000 in the January 14 week and forecasters see a reversal for the January 21 week, up a consensus 12,000 to 246,000. Claims data have been very low and consistent with strong demand for labor.

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.