US: Jobless Claims

Thu Apr 05 07:30:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
New Claims - Level 230K 222K to 230K 242K 215K 218K
4-week Moving Average - Level 228.25K 224.50K 225.25K
New Claims - Change 24K -12K -9K

After holding steady near record lows since the middle of January, initial jobless claims popped 24,000 higher to 242,000 and well beyond Econoday's high estimate. There are no special factors behind the jump but given that the reporting period, the week of March 31, falls outside the sample period of the monthly employment report, today's results are not likely to pull down expectations for strength in tomorrow's report.

In an offset, continuing claims fell a very sizable 64,000 to 1.808 million in the March 24 week which, however, also falls outside the sample period for the monthly employment report. The unemployment rate for insured workers is unchanged for a fifth straight week at a very low 1.3 percent.

Despite the headline rise for initial claims, unemployment claims remain solidly consistent with strong demand for labor.

Market Consensus Before Announcement
Initial claims are expected to come in at 230,000 in the March 31 week vs a 45-year low of 215,000 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.