US: Jobless Claims

February 2, 2017 07:30 CST

Consensus Consensus Range Actual Previous Revised
New Claims - Level 253K 250K to 258K 246K 259K 260K
4-week Moving Average - Level 248.00K 245.50K 245.75K
New Claims - Change -14K 22K 23K

Initial claims continue to dig out a new plateau of lows so far this year, down 14,000 in the January 28 week to 246,000. The 4-week average, at 248,000, has held below 250,000 for three straight weeks which is a first for this reading.

Continuing claims have not been moving lower but are still favorable, down 39,000 in lagging data for the January 21 week to 2.064 million. This 4-week average is down 13,000 to 2.080 million with the unemployment rate for insured workers holding at a very low 1.5 percent.

There are no special factors in today's report, one that confirms the general health of the labor market going into tomorrow's employment report.

Market Consensus Before Announcement
Initial jobless claims jumped 22,000 to a higher-than-expected 259,000 in the January 21 week and forecasters see an easing back down in the January 28 week, down a consensus 6,000 to 253,000. 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.