US: Jobless Claims

February 9, 2017 07:30 CST

Consensus Consensus Range Actual Previous
New Claims - Level 250K 245K to 250K 234K 246K
4-week Moving Average - Level 244.25K 248.00K
New Claims - Change -12K -14K

Layoffs remain extremely low and are pointing to another strong employment report for February. Initial claims fell 12,000 in the February 4 week to 234,000, the lowest reading since November and one of the lowest on record. The 4-week average is down 3,750 to 244,250 which is more than 10,000 below the month-ago trend and a new cycle low (since 1973).

Continuing claims are also near record lows though the latest data, for the January 28 week in this case, did rise 15,000 to 2.078 million. The 4-week average, however, is down 4,000 to a 2.076 million level that is also 10,000 below the month-ago trend.

There are no special factors in today's report, one that confirms strong demand in the labor market.

Market Consensus Before Announcement
Initial jobless claims are expected to come in little changed in the February 4 week, at 250,000 vs 246,000 in the prior week. 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.