Economic Preview: Initial Jobless Claims

After a soft U.S. Employment Report last Friday, Thursday's Jobless Claims release will be watched closely by both investors and the Federal Reserve.

What the Report Tells Us

The Initial Jobless Claims figure shows the number of first-time claims for jobless benefits in the United States, covering the week ended the prior Saturday.

Continuing claims shows the number of unemployed people who qualify for and are currently receiving unemployment benefits.

The Initial Jobless Claims figure can be volatile and skewed by shortened workweeks. However, a four week moving average of initial claims is also published within the report, compensating for the volatility in the week-to-week figure.

This report is important in that it provides insight to the level of job growth nationwide, a key factor in the health of the economy.

Release Source and Time

The report is issued by the U.S. Department of Labor at 8:30 a.m. EST each Thursday. The latest report can be viewed on the Department of Labor website.

Market Expectations for Thursday January 16th

Analysts are expecting Initial Jobless Claims to come in at 328K. Last week's reading came in at 330K, beating expectations of 335K. Continuing jobless claims are expected to come in at 2,848K. The prior week's reading was 2,865K, missing expectations of 2,815K. The four week average came in last week at 349K.

Key Levels

A change of 30K is often viewed by analysts as a minimum for signaling a significant change in job growth.

400K is looked to as an important figure in terms of reflecting the health of the economy. A sustained rise over the 400K level is widely viewed by analysts as signaling a threat of entering recession. A sustained drop below 375K is viewed as reflecting a move towards economic recovery.

Market Reaction

For stocks, a number coming in higher than expected (reflecting more people filing for jobless benefits) is typically bearish. A number coming in lower than expected (reflecting fewer people filing for jobless benefits) is typically bullish.

The inverse applies for the bond market. For bonds, a number coming in higher than expected is typically bullish. A number coming in lower than expected is typically bearish.

For the U.S. dollar, a number coming in higher than expected is typically bearish while a number coming in lower than expected is typically bullish.

Market volatility is normally seen when the report comes in substantially higher or lower than expected.