US: Jobless Claims

Thu Oct 26 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 235K 225K to 240K 233K 222K 223K
4-week Moving Average - Level 239.50K 248.25K 248.50K
New Claims - Change 10K -22K -21K

Puerto Rico is becoming a factor but claims data are otherwise very steady at historic lows. Initial claims rose 10,000 in the October 21 week to 233,000 which is just below Econoday's consensus. Claims from hurricane-stricken areas have now leveled except for Puerto Rico where claims jumped by more than 1,000 to 3,242. This could go higher in the weeks ahead.

Showing no hurricane effects are continuing claims which, in lagging data for the October 14 week, fell 3,000 to 1.893 million. The unemployment rate for insured workers is only 1.3 percent. Except for the wildcard of Puerto Rico, jobless claims are consistent with full employment.

Market Consensus Before Announcement
Hurricane effects have completely eased from initial jobless claims which hit a 44-year low in the prior week at 222,000. Yet Puerto Rico is still an unknown given low levels of claims still coming out of the territory. The consensus call for the October 21 week, at 235,000, sees only a limited increase and no major Puerto Rican effect.

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.