US: Jobless Claims

Thu Jun 28 07:30:00 CDT 2018

Consensus Consensus Range Actual Previous
New Claims - Level 220K 219K to 225K 227K 218K
4-week Moving Average - Level 222.00K 221.00K
New Claims - Change 9K -3K

Initial jobless claims rose more than expected in the June 23 week but remain very low, at 227,000 which lifts the 4-week average only marginally to 222,000. This average is roughly in line with readings in May which points convincingly at another strong employment report for the month of June. Continuing claims, where data lag by a week, fell 21,000 to 1.705 million with this 4-week average down 3,000 to 1.720 million. All of these readings are at or near historic lows with the 4-week average for continuing claims the lowest since December 1973. The unemployment rate for insured workers is unchanged at a very low 1.2 percent.

Market Consensus Before Announcement
Initial claims are expected to come in at 220,000 in the June 23 week vs 218,000 in the prior week. All readings in this report are at or near historic lows and consistent with 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.