Every week the U.S. Department of Labor issues the Initial Jobless Claims Report. The name is pretty self-explanatory. The report measures the number of unemployed people who filed for benefits for the first time, unlike the Continued Jobless Claims Report, which measures the number of people re-filing for benefits. Published since 1967 every Thursday at 13:30 GMT, it is one of the most closely watched reports by analysts because of the insight it provides (due to its weekly release), not just into the overall health of the US economy, but the strength of its labor market
Generally speaking, a high headliner suggests a weakening economy. One example of this scenario was the 2008 recession. Jobless claims rose significantly just before the economy entered the recession and declined as economic recovery started supporting the labor market. This is particularly important for the US, as consumption accounts for 69% of the GDP. If people are unemployed and on benefits, they won’t consume as much which ultimately stagnates growth. Analysts look for two magic numbers when assessing results – you could call them benchmarks. The first one 400K and the second 375K. Allow me to explain. Several weeks of a headliner higher than 400K could be taken as an indication of economic weakness and perhaps even an early sign of recession. Contrarily, several weeks of a headliner lower than 375K could be taken as an indication of economic stability as fewer workers are being let go
It’s one of the “biggies.” Significant chart movement can be seen, usually when the headliner misses or exceeds consensus, resulting in volatility. Generally, the larger the divergence, the larger the market reaction. Let’s look at the usual, but by no means, universal market reactions.
- Bonds: A higher than expected reading usually supports bond prices while a lower than expected reading puts pressure on prices.
- Stocks: A lower than expected reading usually supports stock prices while a lower than expected reading puts pressure on prices.
- Currencies: A lower than expected reading usually support the Dollar, resulting in an appreciation against other major currencies while a higher than expected reading puts pressure on prices.
Why It Should Be On Your Calendar:
Its release is succinctly presented, which means market participants can quickly and effectively pick up raw data, process it and apply it.
Its weekly release makes it an accurate and timely indicator of the labor market situation.
It’s the fourth week in a row that the US Jobless Claims report nails a lower than expected result, and with a drop, to almost 45-year lows it seems the US labor market is doing pretty well. Consensus for today’s report is at 229K, a little higher than last time’s 221K headliner. Simply put, everyone’s expecting a slow-down. Will today’s release mark the fifth week of better than expected results? Not long till 13:30 GMT.
This article is for educational and informative purposes only and should not be considered as investment or trading advice.