U.S. Weekly Jobless Claims Hit 1-Year High Amid Shutdown

by Ike Obudulu Posted on January 31st, 2019

Washington, D.C., USA: The Labor Department released a report on Thursday showing a significant rebound in initial jobless claims in the week ended January 26th – after reporting first-time claims for U.S. unemployment benefits at their lowest level in nearly 50 years in the previous week.

The report said initial jobless claims surged up to 253,000, an increase of 53,000 from the previous week’s revised level of 200,000.

Economists had expected jobless claims to rise to 215,000 from the 199,999 originally reported for the previous week.

With the much bigger than expected increase, jobless claims reached their highest level since hitting 254,000 in September of 2017.

The slightly upwardly revised reading on jobless claims in the previous week was still the lowest since a matching figure in October of 1973.

The Labor Department said its less volatile four-week moving average edged up to 220,250, an increase of 5,000 from the previous week’s revised average of 215,250.

Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also rose by 69,000 to 1.782 million in the week ended January 19th.

The four-week moving average of continuing claims climbed to 1,737,750, an increase of 8,000 from the previous week’s unrevised average of 1,729,750. The average reached its highest level since early last August.

On Friday, the Labor Department is scheduled to release its more closely watched report on the employment situation in the month of January.

Employment is expected to rise by 166,000 jobs in January after spiking by 312,000 jobs in December, while the unemployment rate is expected to hold at 3.9 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.

Initial Claims

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.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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