US: Jobless Claims

Thu Mar 22 07:30:00 CDT 2018

Consensus Consensus Range Actual Previous
New Claims - Level 225K 220K to 230K 229K 226K
4-week Moving Average - Level 223.75K 221.50K
New Claims - Change 3K -4K

The monthly employment report looks to be strong again based on initial jobless claims which, in the sample week for the monthly report, remain low and favorable. Initial claims in the March 17 week inched 3,000 higher to 229,000 with the 4-week average up slightly to 223,750. A comparison with the sample week of the February employment report shows no significant change. Continuing claims, in lagging data for the March 10 week, fell 57,000 to 1.828 million and a new multi-decade low. Employers are holding onto their employees like never before which is an indication that labor demand is unusually strong.

Market Consensus Before Announcement
Versus 226,000 in the prior week, initial claims are expected to come in at 225,000 in the March 17 week which is the sample week of the monthly employment report. Claims have been low and consistent with minimal layoffs and 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.