US: Jobless Claims

Thu Mar 29 07:30:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
New Claims - Level 228K 220K to 230K 215K 229K 227K
4-week Moving Average - Level 224.50K 223.75K 225.00K
New Claims - Change -12K 3K 1K

March looks to be another strong month for the labor market based on jobless claims which are at record lows. Initial claims fell 12,000 in the March 24 week to a lower-than-expected 215,000 and the lowest level in 45 years. The 4-week average is down slightly to 224,500 and in line with February's trend.

Continuing claims, in lagging data for the March 17 week, rose 35,000 but this 4-week average is down 12,000 to 1.862 million and running roughly 50,000 below February. The unemployment rate for uninsured workers is only 1.3 percent. There are no special factors in today's report.

Market Consensus Before Announcement
Initial claims are expected to come in at 228,000 in the March 24 week vs 229,000 in the prior week. 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.