Market Overview

US Initial Jobless Claims Signal a Struggling Labor Market

Initial jobless claims data measure the number of individuals filing for jobless benefits for the first time during the previous week. A lower-than-expected reading is typically a positive signal about the U.S. job market, as more people remain employed.

When emerging unemployment is low and less than expected, it indicates a relatively healthy economy or a recovering economy.

In its weekly report, the U.S. Department of Labor said, for the week ending June 16, the advance figure for seasonally adjusted initial claims was 387,000. This reading was higher than the consensus estimate of 383,000, but decreased 2,000 from the previous week's revised figure of 389,000. This 389,000 reading was revised upward from 386,000.

Thursday, the initial jobless claims' 4-week moving average was 386,250, increasing 3,500 from the previous week's revised average of 372,750.

Continuing jobless claims measure the number of unemployed individuals who continue to be eligible for unemployment benefits.

In its weekly report, the U.S. Department of Labor said the advance number for seasonally adjusted insured unemployment, during the week ending June 9, was 3,299,000. This number was worse than the consensus estimate of 3,278,000, but unchanged from the preceding week's revised level of 3,299,000. The previous week's figure was revised up to 3,299,000 from 3,278,000.

The 4-week moving average for continuing jobless claims increased by 5,250 on Thursday. The average moved to 3,293,750 from the preceding week's revised average of 3,288,500.

U.S. equity futures initially moved slightly lower after the 8:30 a.m. ET release. During Thursday's regular trading hours, the Dow Jones Industrial Index traded around 23 points higher.

ACTION ITEMS:

Bullish:
Traders who believe that Thursday's jobless claims readings are a leading indicator for the US economy might want to consider the following trades:
  • Short general retail companies like JC Pennny (NYSE: JCP) because, as more individuals leave the workforce, people will likely spend less of their residual income.
  • Also, short consumer discretionary companies like Target (NYSE: TGT) or the Consumer Discretionary ETF (NYSE: XLY)
Bearish:
Traders who do not believe that Thursday's weekly jobless data are a leading indicator for the general US economy 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, consumers probably still need to buy staple products like shampoo and toothpaste.
  • Also, long big-ticket appliance makers like Whirlpool (NYSE: WHR). If the claims trend improves, sell-offs in these stocks may prove to be overdone.
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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