Initial jobless claims
Initial jobless claims can help us gauge the health of the US labor market. It indicates the number of people filing for unemployment. Naturally, if fewer people are filing for this claim, then more people are employed.
The U.S. Department of Labor issues jobless claims data weekly. For the week ending June 25, 2015, it rose by 3,000 to 271,000. This was right in the consensus range of 270,000 and 275,000. This number indicates the low layoff in the market. In the above chart you can see that the four-week moving average for jobless claims has trended downwards since 2010. This indicates growing strength in the US labor market. It’s positive for restaurants.
For 16 straight weeks, jobless claims came in below 300,000 levels. Usually, claims below 300,000 levels mean strength in the job market.
How can this data help restaurant investors?
The jobless claims indicate a tight labor market. This could put pressure on wages. Restaurant investors should keep a close eye on the cost line items of their respective restaurant stocks. This also impacts the Consumer Discretionary Select Sector SPDR Fund ETF (XLY). XLY holds ~1% of Chipotle Mexican Grill (CMG), 0.3% of Darden (DRI), 3% of Starbucks (SBUX), and 1.5% of Yum! Brands (YUM).