US: Jobless Claims

Thu Apr 12 07:30:00 CDT 2018

Consensus Consensus Range Actual Previous
New Claims - Level 230K 225K to 232K 233K 242K
4-week Moving Average - Level 230.00K 228.25K
New Claims - Change -9K 24K

Jobless claims decreased 9,000 in the April 7 week to 233,000 but are still trending slightly higher in what may be, at least possibly, a negative signal for the labor market. The 4-week average is at 230,000 which is roughly 10,000 above the month-ago trend. Readings in the 230,000 range, though very low and consistent with strong demand for labor, may mark a modest shift higher for layoffs which would be of no major concern if not for the slowing seen in March payroll growth to 103,000 following a long stretch averaging about 200,000 per month.

One factor that will limit the effect on expectations is that April, because of Easter shifts, can be a difficult time for adjustments. Still the rise underway in initial claims, though minimal, is not a positive for the outlook on the April employment report.

Continuing claims rose 53,000 to 1.871 million in lagging data for the March 31 week in a rise mitigated by a 2,000 decline in this 4-week average to 1.850 million. The unemployment rate for insured workers remains very low, at only 1.3 percent for the 6th reading in a row. There were no special factors in the week with, for the first time in a long time, no states estimated.

Market Consensus Before Announcement
Initial claims are expected to come in at 230,000 in the April 7 week vs an outsized jump to 242,000 in the prior week. Even at 242,000, claims have been 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.