The Jobless Claims figures are comprised of two categories as reported by the U.S. Department of Labor:
- The Initial Unemployment Claims report is a measure of the number of individuals in the U.S. who are filing for jobless benefits for the first time during the past week.
- Insured Unemployment figures, or “Continuing Claims”, are those Americans currently receiving unemployment benefits.
The initial unemployment claims are very volatile, and the trend they portray between periods is of greater importance than the number itself. Rising claims indicates an economy in decline, while a reduction in claims indicates economic recovery and growth.
Jobless claims are a leading economic indicator for measuring broad employment trends and the health of the economy, but it should be noted that they do not include substantial groups such as self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several other small (primarily seasonal) worker categories that are not covered by unemployment insurance programs.
Should the economy have especially low unemployment, an alternative problem may arise. 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, and bond and stock prices will fall.
The average weekly initial jobless claims are one of the 10 components of The Conference Board Leading Economic Index.
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