US: Jobless Claims

Thu Nov 02 07:30:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 235K 235K to 240K 229K 233K 234K
4-week Moving Average - Level 232.50K 239.50K 239.75K
New Claims - Change -5K 10K 11K

Claims in Puerto Rico are rising but are offset by overall improvement as initial claims fell 5,000 in the October 28 week to a lower-than-expected 229,000. The 4-week average is down for the 5th week in a row, 7,250 lower to a 232,500 level that is 35,000 below a month ago in a comparison that points to strength for tomorrow's October employment report.

The 4-week average also marks a 44-year low as do continuing claims which, in lagging data for the October 21 week, fell 15,000 to 1.884 million. And in a reading that underscores just how strong demand for labor is, the unemployment rate for insured workers is a very low 1.3 percent.

Puerto Rico reported 6,129 initial claims in the October 28 week, up from a revised 3,447 in the prior week and roughly triple what it usually reports. Rising claims from the territory, as it continues to recover from Hurricane Maria in September, are a risk for future reports.

Market Consensus Before Announcement
Puerto Rico is appearing as a factor yet hurricane effects have otherwise eased. Initial claims are expected to rise slightly in the October 28 week to a consensus 235,000. Claims in the prior week totaled 233,000 with Puerto Rico rising sharply to more than 3,000.

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.