US: Jobless Claims

Thu Sep 21 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 303K 274K to 325K 259K 284K 282K
4-week Moving Average - Level 268.75K 263.25K 262.75K
New Claims - Change -23K -14K -16K

Initial jobless claims fell sharply and unexpectedly in the September 16 week but may reflect the inability of displaced workers in hurricane hit states to file claims. Claims fell 23,000 to 259,000 though the 4-week average did rise 6,000 to 268,750.

Claims from Florida, which had to be estimated in the prior week, doubled to nearly 10,000 though claims from Texas, which jumped more than 50,000 to over 60,0000 immediately following Harvey's landfall, fell back for a second week, to roughly 28,500 which is still double than normal. Other states hit by hurricanes include Puerto Rico where claims only edged higher in the latest week but appear certain, especially after yesterday's landfall by Hurricane Maria, to spike sharply in the weeks ahead. The latest data from South Carolina and the Virgin Islands had to be estimated.

Continuing claims, in lagging data for the September 9 week, may be showing some hurricane effects, rising a sharp 44,000 to 1.980 million though the 4-week average is only marginally higher at 1.953 million and the unemployment rate for insured workers is unchanged at 1.4 percent.

Though hinting at greater joblessness, this report is still too clouded to get much of handle on the employment effects of Hurricanes Harvey and Irma and offers few clues on how payrolls will be affected in the September employment report.

Market Consensus Before Announcement
Hurricane volatility makes the initial jobless claims call difficult but the consensus for the September 16 is 303,000 vs 284,000 and 298,000 in the prior two weeks. Claims in Texas edged back in the September 9 week but still remained elevated while those in Florida had to be estimated. Hurricane Harvey and Hurricane Irma will be skewing claims data for at least 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.