Washington, D.C., USA: First-time claims for U.S. unemployment benefits pulled back in the week ended February 2nd after the jump seen in the previous week, according to a report released by the Labor Department on Thursday.
The report said initial jobless claims fell to 234,000, a decrease of 19,000 from the previous week’s unrevised level of 253,000. Economists had expected jobless claims to drop to 221,000.
The smaller than expected decrease came after jobless claims rebounded to their highest level since September of 2017 in the previous week.
The Labor Department said the less volatile four-week moving average rose to 224,750, an increase of 4,500 from the previous week’s unrevised average of 220,250.
Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, slid by 42,000 to 1.736 million in the week ended January 26th.
The four-week moving average of continuing claims still edged up to 1,741,250, an increase of 4,250 from the previous week’s revised average of 1,737,000.
Last Friday, the Labor Department released a separate report showing much stronger than expected job growth in the month of January, although the report also showed a substantial downward revision to the pace of job growth in December.
The Labor Department said non-farm payroll employment surged up by 304,000 jobs in January compared to economist estimates for an increase of about 165,000 jobs.
However, the report also showed the spike in employment in the previous month was downwardly revised to 222,000 jobs from the initially reported 312,000 jobs.
Andrew Hunter, Senior U.S. Economist at Capital Economics, said the jump in employment in January still provides “further evidence that economic growth remains solid and that the government shutdown had little impact.”
Despite the strong job growth, the unemployment rate unexpectedly inched up to 4.0 percent in January from 3.9 percent in December. Economists had expected the unemployment rate to be unchanged.
The unemployment rate ticked up to its highest level since last June, as the household survey measure of employment showed a decrease of 251,000 due to a rise in workers on temporary layoff as a result of the government shutdown.
Meanwhile, the report said average hourly employee earnings rose by 3 cents to $27.56 in January, reflecting a 3.2 percent increase compared to the same month a year ago. The annual rate of growth slowed from 3.3 percent in December.
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.