| Consensus | Consensus Range | Actual | Previous | Revised | |
| Initial Claims - Level | 214K | 200K to 222K | 187K | 208K | 209K |
| Initial Claims - Change | -22K | -8K | |||
| 4-Week Moving Average | 207.5K | 214.25K | 214.75K |
Highlights
There was no rebound in Initial jobless claims last week, dropping instead below the 200,000-plus range it has maintained since early May to the lowest level this year since the 190,000 reported for the April 25 week and the lowest level in the series since 1969. Longer-term claims have also fallen just below the 1.8 million-mark for two consecutive weeks. This could bolster the argument by the more hawkish members of the FOMC that inflation, not the labor market, should be the Federal Reserve’s focus right now.
Initial jobless claims came in much less than expected, with the level reported in the week ending July 18 down 22,000 from the revised 209,000 level reported for the prior week (previously 208,000). The July 18 week’s level compares to the consensus of 214,000 in the Econoday survey of forecasters. The four-week moving average is down by 7,250 to 207,500 in the July 18 week.
Seasonal factors had expected a decrease in unadjusted claims of 31,379 (-12.8 percent) from the previous week, but instead there was a larger contraction by 53,718 (-21.8 percent).
No states reported a noticeable rise in unadjusted first-time claims, while California (-3,952), Michigan (-4,977), New York (-16,954), Pennsylvania (-2,350) and Texas (-2,453) reported significant declines.
Insured unemployment was at 1.796 million in the July 11 week, with the prior week’s level revised to 1.798 million from 1.805 million. Continuing claims are lower by 145,000 vs. the same week a year ago. The four-week moving average is down 4,000 to 1.805 million, from a revised 1.809 million in the July 4 week. The insured rate of unemployment remained at 1.2 percent in the July 11 week.
Market Consensus Before Announcement
The consensus looks for claims up 6K at 214K in the latest week after falling 8K to 208K last week. The 4-week moving average was 214.25K last week.
Definition
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.
Description
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 it growing, 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.
