US: Jobless Claims

Thu Dec 28 07:30:00 CST 2017

Consensus Consensus Range Actual Previous
New Claims - Level 240K 235K to 240K 245K 245K
4-week Moving Average - Level 237.75K 236.00K
New Claims - Change 0K 20K

Initial jobless claims were unchanged at 245,000 in the December 23 week though, due to the holidays, an unusually large total of 15 states had to be estimated (this includes the territories of the Virgin Islands and also Puerto Rico where post-hurricane conditions are still disrupted and the estimate is elevated at 5,423 which is roughly double the average). Though 245,000 is a bit on the high side for initial claims, the 4-week average is still low, at 237,750 for only a slight gain in the week.

Continuing claims in lagging data for the December 16 week rose slightly to 1.943 million with this 4-week average down 24,000 to 1.920 million. The unemployment rate for insured workers remains at 1.4 percent.

The large number of estimates clouds this report but earlier readings in December point to strong health for the labor market and to another favorable monthly employment report.

Market Consensus Before Announcement
Initial claims are expected to come in at 240,000 in the December 23 week vs 245,000 in the December 16 week. Claims have been very low and favorable and consistent with very strong demand for labor.

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.