US: Jobless Claims

Thu Oct 05 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous
New Claims - Level 265K 260K to 300K 260K 272K
4-week Moving Average - Level 268.25K 277.75K
New Claims - Change -12K 12K

Hurricane impacts appear to be fading as initial jobless claims fell 12,000 in the September 30 week to 260,000 which hits Econoday's low estimate. Claims in Texas continue to come down following Hurricane Harvey's late August strike while claims in Florida and Georgia, both hit by Hurricane Irma at mid-month, are also coming down. Overall continuing claims, in lagging data for the September 23 week, rose very slightly to 1.938 million.

Claims in Puerto Rico, struck by both Irma and most critically by Maria late last month, continue to be estimated. Initial claims in the Virgin Islands, which are not being estimated, spiked by nearly 1,000 to 1,039 which offers a hint at possible future effects when Puerto Rico begins filing its own data.

Yet the message of this report is positive, suggesting that the labor-market impact from this season's heavy run of hurricanes will prove far more limited than Katrina's strike in 2005. Initial claims are only about 20,000 higher from their mid-August trend. Today's report may boost expectations for a respectable showing in tomorrow's September employment report.

Market Consensus Before Announcement
Hurricane volatility has made initial jobless claims very difficult to forecast but the consensus for the September 30 week is 265,000 vs 272,000 in the prior week. Claims in Texas following Hurricane Harvey have eased back but claims in Florida after Hurricane Irma have been on the rise. Claims in Puerto Rico, where unemployment offices have been closed following Hurricane Maria, are likely to estimated once again.

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.