| Consensus | Consensus Range | Actual | Previous | Revised | |
| Initial Claims - Level | 201K | 192K to 210K | 199K | 197K | 198K |
| Initial Claims - Change | 1K | 9K | |||
| 4-Week Moving Average | 198.75K | 202.75K | 203.25K |
Highlights
Initial jobless claims last week remain below the 200,000 mark for the third consecutive week and, more noteworthy, the four-week moving average dipped below 200,000 and has been on a downward trajectory since the June 27 week. Longer-term claims barely moved back above 1.8 million. This data further bolsters the argument by the more hawkish Federal Reserve officials that inflation, not the labor market, should be the central bank’s top priority.
Initial jobless claims came in less than expected, with the level reported in the week ending August 1 up 1,000 from the revised 198,000 level reported for the prior week (previously 197,000). The August 1 week’s level compares to the consensus of 201,000 in the Econoday survey of forecasters. The four-week moving average is down by 4,500 to 198,750 in the August 1 week.
Seasonal factors had expected a decrease in unadjusted claims of 5,752 (-3.3 percent) from the previous week, which pretty much matches the actual contraction by 5,289 (-3.0 percent).
No states reported a notable rise or significant decline in unadjusted first-time claims.
Insured unemployment was at 1.801 million in the July 25 week, with the prior week’s level revised to 1.777 million from 1.782 million. Continuing claims are lower by 162,000 vs. the same week a year ago. The four-week moving average is down 5,000 to 1.791 million, from a revised 1.796 million in the July 18 week. The insured rate of unemployment remained at 1.2 percent in the July 25 week.
Market Consensus Before Announcement
Claims expected at 201K in the latest week after rising 9K to 197K last week. The 4-week moving average was last at 202.75K and it has been declining lately. If the 4-week moving average moves below 200K, it might prompt a reassessment of the labor market.
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.
