US: Jobless Claims

Thu Feb 01 07:30:00 CST 2018

Consensus Consensus Range Actual Previous Revised
New Claims - Level 235K 234K to 240K 230K 233K 231K
4-week Moving Average - Level 234.50K 240.00K 239.50K
New Claims - Change -1K 17K 15K

After a period of volatility, jobless claims may be settling down. Initial claims totaled a modest 230,000 in the January 27 week following a revised 231,000 in the prior week. Claims had been stable through most of last year at about the 240,000 level before the hurricane season upended the data beginning in late August. The 4-week average is down for a third week in a row, at 234,5000 which is more than 5,000 below where it was a month ago.

Continuing claims in lagging data for the January 20 week rose 13,000 to 1.953 with this 4-week average up 12,000 to a 1.933 million level that is marginally higher than the month-ago comparison. The unemployment rate for insured workers is unchanged at a very low 1.4 percent.

Maine was the only state estimated in the week which perhaps underscores that a period of stability may be ahead for claims data. Today's results help confirm the health of the labor market, specifically the low level of layoffs, going into tomorrow's employment report for January.

Market Consensus Before Announcement
Initial claims are expected to come in at 235,000 in the January 27 week compared to 233,000 in the January 20 week. Jobless claims have been showing recent volatility yet have been firmly consistent with a low level of layoffs and unusually 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.