Market Overview

US Jobless Claims Signal a Recovering Labor Market

Initial Jobless Claims measures the number of individuals filing for initial jobless benefits for the first time during the past week. A lower-than-expected number is essentially better for the US economy, as more people remain in the workforce, than expected. More people who remain in the workforce have a greater potential to spend their residual income, rather than if they were filing for unemployment benefits.

In its weekly report, the U.S. Department of Labor said In the week ending February 25, the advance figure for seasonally adjusted initial claims was 351,000 better than the estimate of 355,000, which was a decrease of 2,000 from the previous week's revised figure of 353,000. The 4-week moving average was 354,000, a decrease of 5,500 from the previous week's revised average of 359,500.

The previous week's figure was revised up to 353,000 from 351,000.

Continuing Jobless Claims measures the number of unemployed individuals who continue to be eligible for unemployment insurance benefits.

In its weekly report, the U.S. Department of Labor said the advance number for seasonally adjusted insured unemployment during the week ending February 18, was 3,402,000 better than the estimate of 3,418,000, which was a decrease of 2,000 from the preceding week's revised level of 3,404,000. The 4-week moving average was 3,444,000, a decrease of 12,250 from the preceding week's revised average of 3,456,250.

The previous week's figure was revised up to 3,404,000 from 3,392,000.

US equity futures saw an initial move lower after the 8:30 a.m. ET release. Currently, Dow Jones Industrial Index Futures are trading about 33 points higher in pre-market trading.


ACTION ITEMS:

Bullish:
Traders who believe that a better-than-expected reading in jobless claims is positive for the US economy, you might want to consider the following trades:
  • Long general retail companies like JC Pennny (NYSE: JCP) because as more people remain in the workforce, the more likely people will spend their residual income, as they continue to have a job.
  • Also, long Consumer Discretionary companies like Target (NYSE: TGT) or the Consumer Discretionary ETF (NYSE: XLY)
Bearish:
Traders who do not believe that the weekly jobless data is a leading indicator for the general US economy, you may consider alternative positions:
  • Long Consumer Staple companies like Procter & Gamble (NYSE: PG) and Colgate (NYSE: CL) because even if less people remain in the workforce, they still need to buy staple products like shampoo and toothpaste.
  • Also, short big-ticket appliance makers like Whirlpool (NYSE: WHR) if the claims trend is worse-than-expected.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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