US: Jobless Claims

Thu Oct 12 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 252K 250K to 275K 243K 260K 258K
4-week Moving Average - Level 257.50K 268.25K 267.00K
New Claims - Change -15K -12K -11K

With Puerto Rico still a wildcard, hurricane effects appear to be dissipating in initial jobless claims which fell 15,000 in the October 7 week to a lower-than-expected 243,000. After 2 weeks of being estimated, Puerto Rico issued its own results which were very low, presumably reflecting the inability of dislocated workers to file claims. Claims in the territory came in at only 118 vs downward revised totals of 328 and 312 in the prior 2 weeks (2,315 and 2,489 were the initial estimates). The Virgin Islands, at 1,154, were estimated in the latest week vs a slightly upward revised 1,054 in the prior week. South Carolina and Virginia were also estimated in the week.

Continuing claims, in lagging data for the September 30 week, fell 32,000 to 1.889 million with the 4-week average down 12,000 to a 1.925 million level that is tracking about 25,000 below the month-ago comparison. The unemployment rate for insured workers is also very favorable, down 1 tenth to a very low 1.3 percent.

Aside from the distortions from Puerto Rico, where claims may well spike in the coming reports, levels are returning to their pre-hurricane levels and pointing to great strength in the labor market, indicated by the 4-week average for initial claims which, at 257,500, is tracking about 5,000 below September.

Market Consensus Before Announcement
Pressures from Hurricane Harvey's hit on Texas and Hurricane Irma's strike on Florida have been easing in recent jobless claims reports though the effects of Hurricane Maria on Puerto Rico, which so far have been estimated, pose a risk for an over-sized increase. But forecasters are calling for further improvement in initial jobless claims during the October 7 week, at a consensus 252,000 vs 260,000 in the prior week.

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.