US: Jobless Claims

Thu Nov 30 07:30:00 CST 2017

Consensus Consensus Range Actual Previous Revised
New Claims - Level 240K 235K to 245K 238K 239K 240K
4-week Moving Average - Level 242.25K 239.75K 240.00K
New Claims - Change -2K -13K -12K

Jobless claims are very low and Puerto Rico has stabilized in what is the latest good news on the labor market. Initial jobless claims fell 2,000 in the November 25 week to 238,000. Claims in Puerto Rico, after peaking at 7,000 in the prior week, fell back to 2,965 suggesting that the worst of the hurricane impact from Maria may have passed.

Continuing claims, in lagging data for the November 18 week, did rise 42,000 to 1.957 million but the unemployment rate for insured workers held steady at a very low 1.4 percent.

All the readings in this report are very low and point clearly to another monthly employment report where strength will be the theme.

Market Consensus Before Announcement
Initial claims are expected to come in at 240,000 in the November 25 week vs 239,000 in the November 18 week. Data throughout this report are near historic lows though claims from Puerto Rico have been elevated.

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.