US: Jobless Claims

Thu Nov 16 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
New Claims - Level 236K 225K to 249K 249K 239K
4-week Moving Average - Level 237.75K 231.25K
New Claims - Change 10K 10K

Jobless claims rose 10,000 but it's not due to Puerto Rico where the worst evidently is over. Initial claims in the November 11 week came in at 249,000 vs expectations for 236,000 but claims in Puerto Rico, which have been backed up since Hurricane Irma swept the Island back in September, totaled 6,565 which is down from 8,281 in the prior week. Yet claims from Puerto Rico are still about three times as high as usual which did contribute to the week's overall increase, one that lifts the 4-week average a sharp 6,500 higher to 237,750. This is the first gain for the average in 7 weeks.

Continuing claims have shown no hurricane effects and fell a sizable 44,000 in lagging data for the November 4 week to 1.860 million. The unemployment rate for insured workers is down 1 tenth to a very low 1.3 percent.

Despite the bump higher in the latest week for initial claims, the data point to very tight conditions in the labor market.

Market Consensus Before Announcement
Initial claims are expected to come in at 236,000 in the November 11 week vs 239,000 in the November 4 week. Hurricane-related claims from Puerto Rico are still a wildcard.

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.