Washington, D.C., USA: A report released by the Labor Department on Thursday showed a bigger than expected increase in first-time claims for U.S. unemployment benefits in the week ended December 29th.
The report said initial jobless claims climbed to 231,000, an increase of 10,000 from the previous week’s upwardly revised level of 221,000.
Economists had expected jobless claims to edge up to 220,000 from the 216,000 originally reported for the previous month.
Meanwhile, the Labor Department said the less volatile four-week moving average slipped to 218,750, a decrease of 500 from the previous week’s revised average of 219,250.
The report also said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, rose by 32,000 to 1.740 million in the week ended December 22nd.
The four-week moving average of continuing claims also climbed to 1,703,500, an increase of 26,000 from the previous week’s revised average of 1,677,500.
On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report for December.
Employment is expected to increase by 177,000 jobs in December after rising by 155,000 jobs in November, while the unemployment rate is expected to hold at 3.7 percent.
Why Markets Care About Unemployment Insurance Weekly Claims
Unemployment Insurance Weekly Claims – also called Jobless Claims or Initial Claims – measures the number of individuals who filed for unemployment insurance for the first time during the past week.
Unemployment Insurance Weekly Claims is the nation’s earliest economic data. The market impact fluctuates from week to week – there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes.
The usual effect is that if ‘Actual’ is less than ‘Forecast’, it is good for the dollar and vice versa.
Markets care because although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health since consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy.
An initial claim is a claim filed by an unemployed individual after a separation from an employer. The claimant requests a determination of basic eligibility for the UI program. When an initial claim is filed with a state, certain programmatic activities take place and these result in activity counts including the count of initial claims. The count of U.S. initial claims for unemployment insurance is a leading economic indicator because it is an indication of emerging labor market conditions in the country. However, these are weekly administrative data which are difficult to seasonally adjust, making the series subject to some volatility.
Continued Weeks Claimed
A person who has already filed an initial claim and who has experienced a week of unemployment then files a continued claim to claim benefits for that week of unemployment. Continued claims are also referred to as insured unemployment. The count of U.S. continued weeks claimed is also a good indicator of labor market conditions.
Continued claims reflect the current number of insured unemployed workers filing for UI benefits in the nation. While continued claims are not a leading indicator (they roughly coincide with economic cycles at their peaks and lag at cycle troughs), they provide confirming evidence of the direction of the U.S. economy
Seasonal Adjustments and Annual Revisions
Over the course of a year, the weekly changes in the levels of initial claims and continued claims undergo regularly occurring fluctuations. These fluctuations may result from seasonal changes in weather, major holidays, the opening and closing of schools, or other similar events. Because these seasonal events follow a more or less regular pattern each year, their influence on the level of a series can be tempered by adjusting for regular seasonal variation. These adjustments make trend and cycle developments easier to spot. At the beginning of each calendar year, the Bureau of Labor Statistics provides the Employment and Training Administration (ETA) with a set of seasonal factors to apply to the unadjusted data during that year. Concurrent with the implementation and release of the new seasonal factors, ETA incorporates revisions to the UI claims historical series caused by updates to the unadjusted data.