Is Rise in September’s Weekly Jobless Claims a Reason to Worry?



Weekly claims increased 2 months in a row

The average weekly unemployment claims have a weight of 3.0% in the Conference Board Leading Economic Index (or LEI). Weekly unemployment claims, once adjusted for seasonality, can give insights into the trends in employment.

The LEI uses weekly claims data rather than the largely followed non-farm payroll data because weekly claims are more sensitive to business conditions. Uncertainty in demand for workers can be better gauged through the weekly claims data, so this indicator is used in constructing the Conference Board LEI.

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Data from September

The most recent weekly jobless claims were reported on October 19, 2017. Weekly unemployment claims increased to 300,000 in the first week of September due to job losses in the aftermath of Hurricanes Harvey and Irma. The recent weekly jobs data reported on October 19 fell back to 222,000, indicating a return to normalcy.

The Conference Board October LEI uses weekly claims data from September. The average claims for September stood at 267,000 claims compared to 250,400 claims in August. An increase in the number of claims is considered to have a negative impact on the economy. So in the October LEI report, average weekly initial claims had a net contribution of -0.21 (or -21.0%) on the index.

Implication for the markets

The fixed income (BND) and currency markets (UUP) typically experience a spike in volatility (VXX) in response to any shocks in employment numbers. A lower unemployment level is one of the key policy objectives of the Fed. With the focus now on rising interest rates and the Fed’s balance sheet reduction, any changes in unemployment numbers impact the short-term bond (IEF) markets and the US dollar (USDU).

In the next part of this series, we’ll look at the rebound in new orders for the manufacturing sector.


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