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Rise in Jobless Claims Fails to Deter Consumer Firms

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Jul. 31 2015, Published 12:54 p.m. ET

Rise in jobless claims doesn’t deter the consumer sector

US labor market conditions have a direct bearing on the performance of the consumer sector in the US. However, the recent uptick in jobless claims failed to weigh down consumer sector growth in the US. The Consumer Discretionary Select Sector SPDR ETF (XLY) was up 0.36% at the close of trade on Thursday. It has gained 10.84% YTD (year-to-date).

Consumer sector companies like Mondelez International (MDLZ), Michael Kors (KORS), and Netflix (NFLX) ended high on Thursday, July 30. Mondelez International gained 5.03%, Michael Kors was up 5.01%, and Netflix stock gained 4.18%. These stocks have yielded +24.61%, -43.91%, and +128.60%, respectively, so far this year.

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Investors in the consumer discretionary sector, like those invested in XLY, eagerly await the U.S. Department of Labor’s weekly jobless claims report. Initial jobless claims show the number of individuals who have filed for unemployment insurance for the first time. The U.S. Department of Labor’s Employment and Training Administration comes out with this weekly report, which is a good indicator of labor market conditions in the US (SPY) (IVV). A decrease in jobless claims bodes well for the labor market. It’s also good for the economy’s general well-being, as it boosts consumer spending.

Jobless claims were at 267,000

For the week ending July 25, there were 267,000 new claims for unemployment insurance, according to a U.S. Department of Labor report that was released on Thursday, July 30. The figure came in below the median estimate of about 270,000 claims. However, it was up from the previous week’s claim figure of 255,000.

In the US, applications for unemployment benefits increased by 12,000 for the week ending July 25. The four-week moving average for jobless claims was down by 3,750 to 274,750.

However, the rise in jobless claims failed to weigh down the consumer sector, as you can see in the above chart. Consumer comfort seemed to weaken for the week ended July 26, as we’ll discuss next.

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