US: Jobless Claims

Thu Sep 07 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous
New Claims - Level 241K 235K to 255K 298K 236K
4-week Moving Average - Level 250.25K 236.75K
New Claims - Change 62K 1K

More than 50,000 claims from Texas fed a giant and surprisingly unexpected 62,000 jump in initial claims for the September 2 week to 298,000, a week that marks the first from the effects of Hurricane Harvey's strike on Houston. Claims in Texas totaled an unadjusted 51,637 vs usual levels just above 10,000. Despite the disruption of the storm, claims for Texas were not estimated by the Labor Department unlike, however, six other states including California where estimates, reflecting delays tied to Labor Day, had to be made. Judging by prior patterns following other major hurricanes, initial claims levels are likely to remain highly elevated for at least several weeks before easing back.

As those filing initial claims return quickly to their jobs, continuing claims are likely to show less effects from the hurricane. Continuing claims were very low going into the hurricane, down 5,000 in lagging data for the August 26 week to 1.940 million with the 4-week average at 1.948 million which is the lowest showing since mid-June. The unemployment rate for insured employees is only 1.4 percent.

Forecasters missed badly in this report, expecting delays in Texas filings that didn't happen. Hurricane effects, however, will not register in the August employment report which was sampled at mid-month before the storm hit. But Harvey's effects on initial claims promise to be extreme in the coming weeks with its ultimate effect on the September employment report unknown. Also unknown is the future effects of Hurricane Irma which has already swept Puerto Rico (whose data is included in the claims report) and is bearing down on Florida.

Market Consensus Before Announcement
The effects of Hurricane Harvey are not expected to be much of a factor in jobless claims for the September 2 week. Forecasters sees initial claims coming in at 241,000, up only slightly from 236,000 in the August 26 week. Yet the high estimate, at 255,000, does project an early hit.

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.