Washington, D.C., USA: Filings for U.S. unemployment benefits fell last week to the lowest level since 1969, signaling the labor market remains tight despite the partial federal-government shutdown.
Jobless claims declined 13,000 to 199,000 in the week ended Jan. 19, bucking economist forecasts for an increase, Labor Department figures showed Thursday. The four-week average, a less-volatile measure, decreased to 215,000, the lowest since early November.
The surprise drop indicates how reluctant employers are to fire workers, with the strength overshadowing the shutdown affecting one-quarter of the government. In any case, the closure is seen reducing economic growth the longer it drags on.
Initial filings by federal employees jumped by about 15,000 to 25,419 on an unadjusted basis in the week ended Jan. 12, reflecting the third week of the shutdown that’s caused pay to halt for hundreds of thousands of workers. Those figures aren’t included in the headline claims number, which reflects state unemployment-insurance programs.
Analysts caution that it may take more time for the shutdown to be fully reflected in the report, and data on federal employees are reported with a lag.
Initial claims were estimated in six states last week, including California, the most populous state, and Virginia, where many federal workers live. Other estimates included Hawaii, Kansas, North Dakota and West Virginia.
Continuing claims, which are reported with a one-week lag, fell by 24,000 to 1.713 million in the week ended Jan. 12.
Initial claims were the lowest since November 1969. Claims had previously reached as low as 202,000 in the past year.
The unemployment rate among people eligible for benefits held at 1.2 percent for a seventh week.
The previous week’s claims were revised down to 212,000 from 213,000.
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.