Initial Jobless Claims: The Weekly Number Traders Watch

Thursday, early morning. The economic calendar shows a row for initial jobless claims, with columns for the actual figure, the consensus forecast and the previous week. At release the actual fills in. Futures may twitch, or not.

What sits behind the row is simple. Every week, people who have lost a job apply to their state for unemployment insurance, and the US Department of Labor gathers those new applications into a national count. It is the most frequent official look at the job market that exists. Monthly payrolls tell you more. Claims tell you sooner.

The four-week average

A single week is noisy. Holidays shift filing dates. Storms close offices. So the report and most calendars also carry a four-week moving average.

The latest week sits 15,000 above the average, and the average itself has been climbing, which is a steady rise across a month and says more than any single print could. A single jump to 240,000 after three weeks around 210,000 would be a different picture, possibly a holiday or a weather event, and worth a second look before you read anything into it.

Reading the row

Start with the trend. Is the four-week average rising, flat or falling over the last couple of months? Then look at the revision to last week. A previous figure revised from 220,000 to 228,000 changes the story as much as the new number does, and the calendar’s “previous” column often shows the revised value without flagging it. After that, compare the actual with the consensus. The surprise moves prices in the minutes after release. The trend is what matters for the economy.

Measured against the forecast, that week looks like a jump. Measured against the revised prior week, claims barely moved, because most of the rise had already happened and was hiding in the revision.

The report carries an unadjusted count as well. It swings hard around holidays and the turn of the year, when seasonal jobs end in bunches, and the adjusted headline exists to strip those swings out, which is why the calendar row shows the adjusted figure and why comparing an unadjusted week with an adjusted one gives nonsense.

Then glance at continuing claims. These count people still receiving benefits, released a week behind the initial figure. When continuing claims rise while initial claims hold steady, layoffs are not accelerating, and yet people who lose jobs are having a harder time finding new ones, which is a slower and quieter kind of weakness that the headline number misses entirely.

Why traders watch it

Claims are one of the earliest official signs that companies are cutting staff. A labor market that softens tends to show up here before it reaches the monthly unemployment rate, so claims feed into expectations for interest rates and for consumer spending, and through those into stock prices. The reaction depends on the week. In a quiet week the number can move futures. In a busy one it can pass unnoticed.

Ranking the rest of the calendar is covered in how to read an economic calendar. Another early read sits in watch PMI new orders before the headline PMI.

What people get wrong

Reacting to one print is the common one. A single high week is often reversed the next.

Another is ignoring the revision. The calendar’s comparison may be against a number that has already changed.

A third is mixing up the two series. Initial claims measure new layoffs. Continuing claims measure how long people stay out of work. They can move in different directions, and each answers its own question.

For a structured way to fit claims alongside rates and earnings, work through macro weather for stock pickers, starting with the economic releases that move markets. More on the economy is under economics.