US: Jobless Claims

Thu Dec 21 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
New Claims - Level 234K 230K to 240K 245K 225K
4-week Moving Average - Level 236.00K 234.75K
New Claims - Change 20K -11K

Jobless claims moved higher in a report that nevertheless points to strength for the December employment report. Initial claims rose a sharp 20,000 to a higher-than-expected 245,000 in the December 16 week, a week that was also the sampling period for monthly employment. But a comparison with the November sampling period shows little change, only a 5,000 gain, while the comparison of the 4-week averages actually shows improvement, down 4,000 to 236,000.

Hurricane effects in Puerto Rico continue to inflate the total by a couple of thousand though this effect continues to ebb with initial claims in the latest week down about 1,500 to 4,524 which however is still double than normal. Total continuing claims rose 43,000 in lagging data for the December 9 week to 1.932 million with the unemployment rate for insured workers moving higher but still very low at 1.4 percent. Generally, that's the story of today's report: claims moving higher but from very low levels that are still consistent with unusual strength in the labor market.

Market Consensus Before Announcement
Initial claims are expected to come in at 234,000 in the December 16 week vs 225,000 in the December 9 week. Claims have been very low and very favorable though Puerto Rico, and the backlog effects of Hurricane Maria, have been inflating the total by several thousand.

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.