US: Jobless Claims

Thu Jan 11 07:30:00 CST 2018

Consensus Consensus Range Actual Previous
New Claims - Level 245K 240K to 270K 261K 250K
4-week Moving Average - Level 250.75K 241.75K
New Claims - Change 11K 3K

In what might be an early sign of loosening in the labor market, initial jobless claims rose 11,000 in the January 6 week to a higher-than-expected 261,000. The gain is widespread and not centered in Puerto Rico where claims, at 1,778, are down about 500 in the latest week and back to pre-hurricane levels. Only one state, Maine, was estimated in the week. The 4-week average, at 250,750, is up a steep 9,000 in the week and is roughly 15,000 above the month-ago trend which offers an early hint of trouble for the January employment report.

In data for the last week of December, continuing claims showed improvement, down 35,000 to 1.867 million which is a new 44-year low. The unemployment rate for insured workers is down 1 tenth to 1.3 percent.

Initial claims, aside from hurricane distortions in September and October, were remarkably steady and favorable throughout last year which makes the gain in the first week of this year stand out. Next week's initial claims data will be very closely watched and will track the sample week of the January employment report.

Market Consensus Before Announcement
Initial claims are expected to come in at 245,000 in the January 6 week vs 250,000 in the prior 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.