This week continues to be very boring as the lack of key economic data and the expectation of US CPI next Wednesday keeps the markets at bay. Today, after the BoE’s policy decision, we will have the latest figures for jobless claims in the United States.
U.S. jobless claims continue to be one of the most important releases to follow each week because they are a more timely indicator of the state of the job market. Indeed, disinflation reaching the Fed’s target is more likely with a weakened labor market. A resilient labor market, however, could make achieving this goal more difficult.
Initial claims continue to hover around cycle lows, while continuing claims remain firm around the 1,800,000 level. This week, initial claims are expected at 210,000 compared to 208,000 previously, while continuing claims are expected at 1,790,000 compared to 1,774,000 previously.
WHY IS IT IMPORTANT?
The data tracks new claims for unemployment insurance benefits from the previous week, which is why the actual name of the report is “weekly unemployment insurance claims.” If people lose their jobs, they apply for unemployment insurance, which will be reflected in the data. Higher unemployment is bad for the economy because it will lead to lower spending and businesses cutting back on investment. On the other hand, a low number of applications can indicate a strong job market, which is good for the economy as a whole.
Unemployment claims data are considered a leading indicator due to their timeliness and are included in the Conference Board’s Leading Economic Index (LEI). It should be noted, however, that not everyone is eligible for unemployment benefits, which can sometimes lead to large discrepancies between the total number of unemployed and the number of people receiving unemployment benefits. Additionally, data can be volatile from week to week, so one should not rush to draw conclusions based on a single release.
It is nevertheless a good current barometer on the state of the job market. Generally, numbers above the 300,000 level signal a deterioration in the labor market, with the 400,000 level potentially indicating an ongoing recession. This is also true for continuing claims, even if the level is around the 3,000,000 mark. Of course, the data should always be taken in the right context and the focus should also be on the trend and the rate of change.
cnbctv18-forexlive
