US: Jobless Claims

Thu Sep 14 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous
New Claims - Level 302K 278K to 320K 284K 298K
4-week Moving Average - Level 263.25K 250.25K
New Claims - Change -14K 62K

Volatility in jobless claims data is assured in the coming weeks as the effects of Hurricane Harvey and Irma play out at unemployment offices in Texas and Florida as well as surrounding states. Initial claims fell back 14,000 to a 284,000 level that is on the low end of Econoday's consensus range. After rising more than 50,000 in the prior week, initial claims in Texas declined nearly 12,000. Claims in Florida had to be estimated while claims in Puerto Rico actually dipped as offices were closed due to Irma.

Continuing claims are steady but may begin to rise as some displaced workers collect extended benefits. In lagging data for the September 2 week, continuing claims fell 7,000 to 1.944 million with the unemployment rate holding at 1.4 percent.

It's too soon to say what the employment effects will be from Irma but the worst effects of Harvey, based on the decline in Texas, may have already passed. More important than jobless claims is monthly payroll growth in the employment report, and here again the easing number of claims in Texas is a positive omen.

Market Consensus Before Announcement
Forecasters missed badly in the September 2 week, calling for little initial effect from Hurricane Harvey which in fact proved severe. Initial claims in the week surged 62,000 to 298,000 and not much more is expected in the September 9 week with the consensus at 302,000. Hurricane Harvey and Hurricane Irma will be enormous wildcards for initial claims data during the next several weeks.

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.