US: Jobless Claims

Wed Nov 22 07:30:00 CST 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 240K 238K to 249K 239K 249K 252K
4-week Moving Average - Level 239.75K 237.75K 238.50K
New Claims - Change -13K 10K 13K

Demand for labor remains unusually strong with initial jobless claims remaining near historic lows, down 13,000 in the November 18 week to 239,000. Puerto Rico, still recovering from Hurricane Maria in September, continues to inflate the total but only modestly, remaining about three times as high as normal but contained, at 6,944 vs 6,690 in the prior week.

Continuing claims are also holding at historic lows, at 1.904 million in lagging data for the November 11 week. The unemployment rate for insured workers did tick 1 tenth higher but also remains near historic lows, at only 1.4 percent.

This report will firm expectations for another solidly positive monthly employment report and should confirm expectations for a rate hike at next month's FOMC.

Market Consensus Before Announcement
Initial claims are expected to come in at 240,000 in the November 18 week vs 249,000 in the November 11 week. Claims have been elevated in hurricane-hit Puerto Rico but did ease 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.