Econoday Report: Jobless Claims 7, 2008

2008 U.S. Economic Events & Analysis

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Jobless Claims

Definition
New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility. Why Investors Care

Released on 8/7/08 For wk 8/2 2008

New Claims - Level
Actual	455K
Consensus	430K
Consensus Range	400K to 463K
Previous	448 K

Highlights
Federal emergency unemployment efforts continue to inflate initial jobless claims which, for the Aug. 2 week, rose 7,000 to a much higher-than-expected level of 455,000 -- the highest level since the very beginning of the expansion in early 2002. The four-week average, at 419,500, is the highest since mid-year 2003. Market News International reports that the Labor Department is still unable to quantify the precise impact of the program which widens availability of initial unemployment benefits.

Weakness in the labor market is more certainly evident in continuing claims which, in data for the July 26 week, rose 31,000 to 3.311 million for the highest level since late 2003. For the July 19 week, continuing claims jumped 183,000.

The dollar eased slightly in muted market reaction to the data which, at least for initial claims, are clouded. But extending increases, especially for continuing claims, is certain to raise talk of greater decreases in underlying payrolls.

Market Consensus Before Announcement
Initial jobless claims spiked 44,000 for the week ending July 26 to 448,000 but statutory changes make interpreting the number a little difficult. Congress recently passed an emergency benefit extension program, allowing a surge in claimants. While there is a good chance that initial claims will shift back down in August - as suggested by the Labor Department - the jump in claims still indicates greater weakness in the economy. The fact that Congress sees the need for an extension of benefits points to increased pain in the labor force. Nonetheless, it may be a month or so before subtle movements in the numbers have significant meaning. On the other hand, further continued increases in the level of initial claims obviously would indicate further weakening in the economy.

Jobless Claims Consensus Forecast for 8/2/08: 430,000
Range: 400,000 to 463,000

Trends

Weekly series fluctuate more dramatically than monthly series even when the series are adjusted for seasonal variation. The 4-week moving average gives a better perspective on the underlying trend.

Data Source: Haver Analytics | Consensus Data Source: Market News International and Thomson Financial