US: Jobless Claims

Thu Sep 28 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 275K 260K to 300K 272K 259K 260K
4-week Moving Average - Level 277.75K 268.75K 268.75K
New Claims - Change 12K -23K -21K

Hurricane effects are apparent in weekly jobless claims data but are far from overwhelming. Initial claims rose 12,000 in the September 23 week to a 272,000 level that is slightly below Econoday's consensus. Claims in Texas continue to come down, at an unadjusted 20,169 in the week which is roughly double the average but a 1/3 of their peak following Hurricane Harvey's landfall in late August. Claims in both Florida and Georgia, both hit by Hurricane Irma early on in this month, are now on the rise but less than catastrophic, with Florida at 18,212 this week vs 10,052 in the prior week, and at 7,917 for Georgia which is up from 4,760. Claims in Puerto Rico, which has since been devastated by Hurricane Maria and where claims are being estimated by the Labor Department, fell to an estimated 2,248 from 2,416. Filings in Virgin Islands also rose but are marginal at 210.

Continuing claims remain very steady and have yet to show any hurricane impacts, at 1.934 million in lagging data for the September 16 week for a 45,000 decline with the 4-week average at 1.950 million. This average has been roughly unchanged since mid-August. The unemployment rate for insured workers is unchanged at 1.4 percent.

Though Puerto Rico is still a concern, the impact so far of this year's very heavy hurricane season has been relatively limited on the labor market, pointing to resilience for payroll data in next week's September employment report.

Market Consensus Before Announcement
Hurricane volatility makes initial jobless claims difficult to call but the consensus for the September 23 week is 275,000 vs an average of 280,000 in the prior three weeks which all had hurricane impacts. Claims in Texas rose sharply at first but have since eased while the initial impact of Hurricane Irma on Florida was heavy.

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.