US: Jobless Claims

Thu Dec 14 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
New Claims - Level 239K 225K to 240K 225K 236K
4-week Moving Average - Level 234.75K 241.50K
New Claims - Change -11K -2K

The first indication on the December labor market is very favorable. Initial claims fell 11,000 in the December 9 week to 225,000 which easily beats Econoday's consensus for 239,000. The drop comes despite still high totals from hurricane-hit Puerto Rico where claims, at 5,740 in the latest week, remain about 4,000 higher than normal though down from earlier weeks including the December 2 week when claims from the territory totaled 7,281.

Continuing claims in lagging data for the December 2 week are likewise favorable, down 27,000 to 1.886 million which takes the unemployment rate for insured workers down 1 tenth to a very low 1.3 percent.

All the readings in this report outside of Puerto Rico are very low and point to a labor market that is at, or is very near, full employment.

Market Consensus Before Announcement
Initial claims are expected to come in at 239,000 in the December 9 week vs 236,000 in the December 2 week. After coming down sharply in the prior week, claims from Puerto Rico rose sharply to over 7,000 with the Labor Department warning of remaining backlog from 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.