Meaning of Jobless Claims
A report issued weekly by the U.S. Department of Labor that tracks what percentage of people have filed for unemployment benefits within the previous week. It’s an honest gauge of the U.S. job market. For instance, when more people file for unemployment benefits, fewer people have jobs and the other way around.
Additional meaning of Initial Jobless Claims:
Investors can use this report back to gather pertinent information about the economy. The report is released at 8:30 AM on Thursdays and may be a market-moving event.
Understanding Initial U.S Jobless Claim
Initial jobless claims is an informational report issued by the U.S. Department of Labor as a neighbourhood of its weekly Unemployment Insurance Weekly Claims Report. Initial jobless claims demand claims for unemployment benefits filed by individuals who are unemployed with state unemployment agencies.
Initial claims should not be confused with the number of people who receive unemployment benefits. For one, initial claims don’t include continued claims—individuals who claim benefits for extra weeks of unemployment beyond their initial claim. Additionally, not all individuals claiming to be unemployed will receive unemployment benefits.
Investors Affected By Release of U.S Jobless Claims
Jobless claims also are used as input for the creation of models and indicators. For instance, average weekly initial jobless claims are one of the ten components of the Conference Board’s Composite Index of Leading Indicators.
Sometimes markets react strongly to a mid-month jobless claims report, mainly if it shows a change from the cumulative evidence of other recent indicators. For example, if other indicators show a weakening economy, a surprise drop in jobless claims could hamper equity sellers and lift stocks. Sometimes this happens because there’s not the opposite recent data to chew on at the time. However, a positive initial jobless claims report also can stray within the shuffle of a busy news day and hardly be noticed by Wall Street.
EFFECT ON THE MARKET
As mentioned, the initial jobless claims measure emerging unemployment, and thus the continued claims data measure the number of people still claiming unemployment benefits. The continued claims data is released one week later than the initial claims. For this reason, the initial claims usually have a far better impact on the financial markets.
Many financial analysts forecast the report into their market forecast. If a weekly release on jobless claims comes insignificantly different than consensus estimates, this may move the markets higher or lower. Generally, the move is that the inverse of the report. If initial jobless claims are down, the market will often rally in an upward trend. Conversely, if the initial jobless claims are up, the market may slump.
The Initial Jobless Claims Report gets plenty of press because of its simplicity and the constatation that the healthier the work market, the healthier the economy. More people are working means more income within the economy, resulting in higher personal consumption and gross domestic product (GDP).
Comparison to other indicators
The jobless claims report is usually monitored closely by the few weekly market indicators produced by the government. The closely watched Employment Situation Summary from the Bureau of Labor Statistics colloquially mentioned because the “jobs report” is paid monthly.
Jobless claims are also one of the few near-real-time indicators produced by the government. Each week’s report includes data for the week ending on the preceding Saturday of the report’s release, providing a measure of market activity hebdomadally after it occurs. By comparison, the monthly Employment Situation Summary’s survey reference period is that the week or the pay period including the 12th day of the month, which suggests the time from data collection to release can extend for weeks.
Unlike many market indicators reported by the Bureau of Labor Statistics, jobless claims are not collected by a survey. They are instead reported by state unemployment agencies and represent an immediate measurement of actual market activity.