Overview: Initial jobless claims after a weak BLS payrolls report

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Initial jobless claims released by the U.S. Department of Labor

The weekly initial jobless claims for the week ending September 6, will be released on Thursday by the U.S. Department of Labor. Initial claims measure the number of people applying for first-time unemployment insurance.

The report will also include continuing claims figures for the week ending August 30. These figures include unemployed workers eligible for unemployment benefits. The figures also include workers currently receiving unemployment benefits.

An increase or decrease in claims implies a deterioration or an improvement in the labor market, respectively.

Part 4

Highlights from last week’s report:

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  • Initial jobless claims increased by 4,000 to 302,000.
  • The four-week moving average for initial claims also increased by 3,000—to 302,750. The moving average is a more reliable indicator. It evens out weekly fluctuations.
  • However, continuing claims were down to 2.464 million—the lowest since June 23, 2007.
  • The four-week moving average for continuing claims fell to 2.511 million—the lowest since July 7, 2007.

Labor market outlook

The Bureau of Labor Statistics’ (or BLS) report on job creation released on September 5. The report was disappointing. Only 142,000 new jobs were added in August—the lowest this year. Monthly additions in 2014 had averaged ~225,000 before to August.

The Job Openings and Labor Turnover Survey (or JOLTS) report—and to a lesser extent, initial jobless claims—would help assess the improvements in the labor market this year. As a result, these reports have important implications for consumption, the retail sector (XRT) (XLY), and stocks like Dollar Tree (DLTR).

Financial markets, including both stocks (DIA) and bonds (BND), also watch labor market conditions. The U.S. Federal Reserve has indicated that it’s watching an index of 19 labor market indicators, before normalizing its monetary policy—raising the federal funds rate. An increase in the federal funds rate would raise yields in bond markets. It would also decline bond prices. In contrast, upbeat economic news usually benefits stocks.

The Vanguard Total Bond Market ETF (BND) invests mainly in U.S. investment-grade debt—both corporate and U.S. Treasuries.

Stocks also benefit from the retail sector’s upbeat news. To learn about retail indicators, please continue reading the next part in the series.

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