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How will this week’s consumption indicators impact debt securities?

Part 3
How will this week’s consumption indicators impact debt securities? (Part 3 of 8)

Must-know: Are initial jobless claims trending lower?

What are weekly initial jobless claims?

The weekly initial jobless claims report will be issued on Thursday, March 13, by the U.S. Department of Labor Employment and Training Administration.

Weekly initial jobless claims are an indicator that measures the number of persons filing for unemployment insurance for the first time. An increase in initial claims usually implies a slowdown in economic activity, whereas a decrease in initial claims means the economy is growing.

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What did last week’s reading indicate?

Initial jobless claims declined by 26,000, to a seasonally adjusted 323,000 for the week ended March 1—the lowest level since November 30, compared to an increase in the previous week of 15,000 to 349,000. The decrease in initial jobless claims indicates fewer layoffs and may signal that the economy is shrugging off the sluggishness brought on by an abnormally cold winter.

How do this week’s employment indicators impact debt markets?

Since the headline JOLTS number, job vacancies, lag the monthly change in non-farm payrolls, analysts expect their impact on bond markets to be limited. The job creation statistic released on Friday, March 7, which reported that 175,000 new jobs were added in February, came in ahead of market expectations. An improvement in employment statistics would imply, other factors remaining constant, that the economy is recovering and the Fed would curtail its economic stimulus policies, which would cause an increase in interest rates and falling bond prices. The reverse would hold true for a deterioration in employment statistics.

Financial markets reacted positively to the change in non-farm payrolls announcement, taking it as a sign of economic recovery with the SPDR S&P 500 ETF (SPY) price up 0.04%, and bond ETFs like TLT down 0.63%, BND down 0.3%, AGG down 0.28%, and TLH down 0.52% on Friday.

To read about an indicator that may have important implications for personal consumption, move on to Part 4 of this series.

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