US: Jobless Claims

Thu Jan 04 07:30:00 CST 2018

Consensus Consensus Range Actual Previous Revised
New Claims - Level 240K 239K to 245K 250K 245K 247K
4-week Moving Average - Level 241.75K 237.75K 238.25K
New Claims - Change 3K 0K 2K

Initial jobless claims rose 3,000 in the December 30 week to 250,000 which is higher than Econoday's consensus but still consistent with strength in the labor market and points to strength for December's payroll data and unemployment rate. The 4-week average is up 3,500 to 241,750 but is very little changed from the month-ago comparison which, again, is a positive signal for tomorrow's employment report.

Continuing claims are also positive, falling 37,000 in lagging data for the December 23 week to 1.914 million with this 4-week average up fractionally to 1.923 million which, like that for initial claims, is little changed from the month-ago comparison. The unemployment rate for insured workers is unchanged at a very low 1.4 percent.

Initial claims from Puerto Rico remain elevated, at 4,074 in the latest week which is about double than normal.

Market Consensus Before Announcement
Initial claims are expected to come in at 240,000 in the December 30 week vs 245,000 in the two prior weeks. 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.