US: Jobless Claims

Thu Feb 08 07:30:00 CST 2018

Consensus Consensus Range Actual Previous
New Claims - Level 235K 230K to 235K 221K 230K
4-week Moving Average - Level 224.50K 234.50K
New Claims - Change -9K -1K

Initial jobless claims have posted four straight very favorable readings, at 221,000 in the February 3 week which takes the 4-week average to 224,500 and a new 45-year low. The average is down more than 25,000 from early January which points to strengthening conditions in the labor market, specifically to declines in what is already a low level of layoffs.

Continuing claims are also down, 33,000 lower in trailing data for the January 27 week to 1.923 million. This 4-week average is down 12,000 to 1.934 million with the unemployment rate for insured workers unchanged at a very low 1.4 percent.

There are no special factors in today's report, one that follows last week's strong payroll gain in January's employment report and one that offers an early sign of strength for February's report.

Market Consensus Before Announcement
After a long spell of volatility, initial claims are expected to come in at 235,000 in the February 3 week in what, after 230,000 and 231,000 in the prior two weeks, would extend the lowest and most stable run since August. Volatile or not, jobless claims have been very low in confirmation that labor demand is strong.

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.