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Jobless Claims
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Released on 7/3/08 For wk 6/28 2008 New Claims - Level
Consensus 385
K *Actual* *404 K * 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 smoothes out weekly
volatility. Why Do Investors Care?
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 threatens, 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.
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