Washington: First-time claims for U.S. unemployment benefits once again slid to their lowest level in nearly 50 years in the week ended April 6th, according to a report released by the Labor Department on Thursday.
The report said initial jobless claims fell to 196,000, a decrease of 8,000 from the previous week’s revised level of 204,000.
The continued drop surprised economists, who had expected jobless claims to rise to 211,000 from the 202,000 originally reported for the previous week.
With the unexpected decrease, initial jobless claims fell to their lowest level since hitting 193,000 in October of 1969.
The Labor Department said the less volatile four-week moving average also dipped to 207,000 from the previous week’s revised average of 214,000, hitting its lowest level since December of 1969.
Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also decreased by 13,000 to 1.713 million in the week ended March 30th.
The four-week moving average subsequently dropped to 1,734,500, a decrease of 11,000 from the previous week’s revised average of 1,745,500.
Last Friday, the Labor Department released a separate report showing a substantial reacceleration in the pace of job growth in the month of March.
The report said non-farm payroll employment jumped by 196,000 jobs in March after edging up by a revised 33,000 jobs in February.
Economists had expected employment to increase by about 180,000 jobs compared to the uptick of 20,000 jobs originally reported for the previous month.
The Labor Department highlighted notable job gains in the healthcare and professional and technical services sectors.
Despite the stronger than expected job growth, the unemployment rate held at 3.8 percent in March, unchanged from February and in line with economist estimates.
The unemployment rate was unchanged as the labor force shrank by 224,000 people compared to a 201,000-person contraction in the household survey measure of employment.
The report said average hourly employee earnings rose by $0.04 to $27.70 in March, although the annual rate of growth slowed to 3.2 percent from 3.4 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.