Understanding Jobless Claims: Key to Economic Insight
Jobless claims are a weekly statistic reported by the U.S. Department of Labor that counts people filing to receive unemployment insurance benefits. There are two categories of jobless claims: initial, which comprises people filing for the first time, and continuing, which consists of unemployed people who have already been receiving unemployment benefits. Jobless claims are a crucial leading indicator of the employment situation and the overall health of the economy.
Key Takeaways
- Jobless claims measure how many people are out of work at a given time.
- Initial jobless claims represent new claimants for unemployment benefits.
- Continuing jobless claims are people who are continuing to receive benefits.
- It is generally a poor sign for the economy when a growing number of people who are willing to work can’t find jobs.
- Because weekly jobless claims can be very volatile, many economists monitor the moving four-week average.
Discovering the Role of Jobless Claims
The nation’s jobless claims are an extremely important indicator for macroeconomic analysis. A weekly report produced and published by the Department of Labor tracks how many new people file for unemployment benefits in the previous week, serving as a good gauge of the U.S. job market. For instance, when more people file for unemployment benefits, it generally means fewer people have jobs, and vice versa.
Investors can form opinions on the country’s economic performance using this report, even though the data is often very volatile because it is reported every week. The moving four-week average of jobless claims is often monitored rather than the weekly figure. The report is released Thursday mornings at 8:30 a.m. ET and can affect market movements.
During the economic downturn caused by the spread of the COVID-19 virus, weekly jobless claims in the U.S. soared to historic levels as companies reduced their payrolls. More than 30 million Americans filed for unemployment from mid-March to April 30, 2020, as businesses halted due to social distancing. The unemployment rate hit 14.7% in April 2020.
These numbers have since improved. There were 208,000 initial jobless claims filed in the week ending April 27, 2024, and about 1.77 million continuing claims filed during the week ending April 20, 2024. The unemployment rate was 3.9% as of April 2024.
How Jobless Claims Influence the Market
Initial jobless claims measure emerging unemployment, while continuing jobless claims track the number of people still claiming unemployment benefits. Since the continued claims data is released one week later than the initial claims, initial jobless claims usually have a higher immediate impact on financial markets.
Many financial analysts incorporate estimates of the report into their market forecasts. If the weekly release of jobless claims significantly differs from consensus estimates, this can move the markets higher or lower. Generally, the market reacts inversely to the report: if initial jobless claims are down, markets often rally; if claims are up, markets may slump.
The Significance for Investors
Markets may react strongly to a mid-month jobless claims report, especially if it contrasts with cumulative evidence from other recent indicators. For instance, if other indicators suggest a weakening economy, a surprise drop in jobless claims could slow equity sellers and potentially lift stocks.
Jobless claims are also used as inputs for models and indicators. For example, average weekly initial jobless claims are one of the 10 components of the Conference Board’s Composite Index of Leading Indicators.
Frequently Asked Questions
Is Jobless the Same As Unemployed?
According to the Bureau of Labor Statistics, the labor force comprises the employed and the unemployed. Those who have jobs are employed. Those who are jobless, looking for a job, and available for work are unemployed.
What Are the 3 Types of Unemployment?
The three types of unemployment are frictional (voluntary changes in employment), structural (changes in the structure of an economy, such as technology replacing workers), and cyclical (those jobs lost due to changes in the business cycle).
Can I Collect Unemployment If I Quit My Job?
No, you cannot collect unemployment if you quit your job. Voluntary unemployment does not qualify for unemployment benefits, which means you are only eligible if you are laid off, and in certain cases, if you are fired.
The Bottom Line
Jobless claims represent the number of people filing weekly to receive unemployment insurance due to unemployment. This is a crucial leading indicator of the health of the economy. Increasing jobless claims signal a weakening economy, while decreasing claims indicate improvement.
Related Terms: unemployment rate, initial jobless claims, continuing jobless claims, labor statistics, macroeconomic analysis.
References
- Federal Reserve Bank of St. Louis. “Which Jobs Have Been Hit Hardest by COVID-19?”
- U.S. Department of Labor. “Unemployment Insurance Weekly Claims”, Page 1.
- Federal Reserve Bank of St. Louis. “Unemployment Rate”.
- U.S. Department of Labor. “Unemployment Insurance Weekly Claims: 8:30 A.M. (Eastern) Thursday, April 13, 2023”, Pages 4, 9.
- The Conference Board. “Global Business Cycle Indicators”.
- U.S. Bureau of Labor Statistics. “How the Government Measures Unemployment”, Select What are the basic concepts of employment and unemployment?
- University of Minnesota via Pressbooks. “Principles of Macroeconomics: 5.3 Unemployment”.
- U.S. Department of Labor. “Unemployment Insurance Program Fact Sheet”, Page 1.
