US: Jobless Claims

Thu Dec 07 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
New Claims - Level 240K 234K to 245K 236K 238K
4-week Moving Average - Level 241.50K 242.25K
New Claims - Change -2K -2K

Despite an unexpected uptick for Puerto Rico, initial jobless claims fell 2,000 in the December 2 week to a lower-than-expected 236,000. The 4-week average is down less than a thousand to a 241,000 level that remains about 10,000 above the month-ago trend and, though low, nevertheless points to less strength for tomorrow's monthly employment report.

Claims in Puerto Rico had fallen sharply in the prior week, down nearly 4,000 to the 3,000 level, but rose back up in the latest week to 7,115. The Labor Department is warning that backlogged claims continue to be processed in the territory and conditions have not yet returned to normal.

A positive are continuing claims which, instead of drifting higher like initial claims, have been steady. Claims in lagging data for the November 25 week fell 52,000 to 1.908 million and remain roughly unchanged against the prior month. The unemployment rate for insured workers remains very low, at 1.4 percent.

The labor market is very healthy though claims data, along with this morning's Challenger report, are not pointing to increasing strength for November's employment data.

Market Consensus Before Announcement
Initial claims are expected to come in at 240,000 in the December 2 week vs 238,000 in the November 25 week. Data throughout this report are near historic lows and claims from Puerto Rico may now be coming down following Hurricane Maria.

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.