US: Jobless Claims

Thu Oct 19 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 240K 235K to 250K 222K 243K 244K
4-week Moving Average - Level 248.25K 257.50K 257.75K
New Claims - Change -22K -15K -14K

Jobless claims have mostly returned to pre-hurricane levels, at a lower-than-expected 222,000 in the October 14 week. This edges out 227,000 back in late February as the lowest reading in 44 years. The October 14 week was the sample week for the October report and a comparison with the sample week of the September employment report points to improvement: the headline level is down 38,000 while the 4-week average, now at 248,250, is down 20,500.

Hurricane effects are ebbing with Texas and Georgia back to pre-hurricane levels though Florida, at just over 11,000 in the latest week, is still running about 4,000 to 5,000 higher. Puerto Rico, which for the past 2 weeks has reported its own data and has not had to be estimated by Washington, is also at pre-hurricane levels though the jury is still out whether claims in the territory will move higher as displaced workers, amid the dislocations, get themselves to the unemployment office.

Continuing claims, where data lag by a week, are also favorable, down 16,000 in the October 7 week to a new multi-decade low at 1.888 million. The unemployment rate for insured workers is a very low 1.3 percent.

Puerto Rico is still an unknown wildcard but in any case the territory's data are not part of the monthly payroll series in the establishment half of the monthly employment report. September payrolls fell 33,000 and, based on jobless claims at least, expectations are likely to build for a substantial payroll snap-back for October.

Market Consensus Before Announcement
Effects from Hurricanes Harvey and Irma have been clearly fading in jobless claims which came in at 243,000 in the October 7 week and only slightly above late August levels. But the effects of Hurricane Maria remain as a major wildcard as Puerto Rico where claims, which are no longer being estimated, have been dribbling in not due presumably to lack of joblessness in the territory but to lack of access to San Juan's unemployment office. Any effect, however, isn't the call among forecasters who see initial jobless claims coming in little changed at 243,000 in the October 14 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.