US: Jobless Claims

Thu Jan 25 07:30:00 CST 2018

Consensus Consensus Range Actual Previous Revised
New Claims - Level 240K 225K to 245K 233K 220K 216K
4-week Moving Average - Level 240.00K 244.50K 243.50K
New Claims - Change 17K -41K -45K

Initial jobless claims rose in the January 20 week but remain low and favorable, at 233,000 which is lower than expected with the prior week revised down 4,000 to 216,000 for a new 45-year low. The 4-week average is down 3,500 to a 240,000 level that is roughly in line with the month-ago trend.

Continuing claims in lagging data for the January 13 week fell 28,000 to 1.937 million with this 4-week average down slightly to 1.920 million and also in line with the month-ago trend. The unemployment rate for insured workers is unchanged at 1.4 percent.

Unlike the prior week when there was a rash of estimates, only one state was estimated in the current week. Today's report points squarely at another very healthy employment report coming up a week from Friday.

Market Consensus Before Announcement
The steep 41,000 drop in initial claims during the January 13 week to 220,000, which was perhaps skewed lower by an unusual number of state estimates, is expected to be reversed in part during the January 20 week where the consensus is 240,000.

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.