The U. S. Department of Labor creates and publishes the Unemployment Insurance Weekly Claims Report, and adjusts the data for seasonal factors and holidays. The report shows the total number of initial filings for unemployment for each week of the current month, and calculates a four-week moving average. The moving average smoothes fluctuations in the data and allows for trend analysis.

IN PICTURES: 6 Hot Careers With Lots Of Jobs

The narrative portion of the report identifies the states with the highest insured unemployment rates, the largest increases in initial claims and where extended benefits were available. It also lists the states that have experienced increases or decreases of more than 1,000 claims in the week reported, as well as a short narrative explaining substantive changes.

Who Can Make a Claim?
The number of claims is not necessarily representative of the number of people out of work. While most workers are covered by the unemployment insurance system, it doesn't normally cover independent contractors, self-employed individuals and agricultural workers. While the eligibility requirements for state programs vary by state, the following list provides the most common guidelines:

  • Must be available and able to work
  • Must me actively looking for work
  • Must register in person at the unemployment office
  • Must have worked at least a specific number of weeks and earned a minimum salary amount within a specified period of time, prior to submitting a claim

Since the figures exclude several categories of workers and those who don't qualify, the claims report understates the total number of people unemployed in any given week. On a state-by-state basis, it reports the total valid claims submitted for qualifying individuals. It does not report the total unemployment rate, so it is not affected by the assumptions used in the calculation of that rate.

Federal Claims
The claims report distinguishes between claims made in state and federal programs. The initial claims in federal programs differentiate federal employees from newly discharged military veterans. (Preparation can help you land on your feet after getting the "old heave-ho". Don't miss Planning For Unemployment.)

The total claiming federal program benefits are broken down into federal employees, discharged veterans, and the railroad retirement board. It further identifies the total persons receiving extended benefits.

Report Indications
In theory, the weekly unemployment data reflect the health of the job market, which translates into the general health of the economy. Since consumer spending accounts for about 70% of the economy, job growth is key to bolstering economic growth. If people are losing jobs, it not only affects their spending, but those around them who fear they might be next to receive a layoff notice.

The jobs report always gets immediate press coverage because it comes out every week, it's simple, and the average person can relate to it. Most people know someone that has lost their job, and headlines during tough economic times grab attention. Lacking other significant economic news, it's common to see an overreaction to the job data, particularly if it's negative.

Effect on the Markets
The financial markets are news-driven and can be greatly influenced by day-traders and short-term swing traders. In addition, the focus is often on how the report compares to expectations from various sources, rather than the actual statistical data. (Depending on how it's measured, the unemployment rate is open to interpretation. Learn how to find the real rate in The Unemployment Rate: Get Real.)

For investors, the weekly release is a two-edged sword. For example, you may see a report that is better than last week but worse than expected, and the market drops. Or the reverse may happen where the report is worse than last week but better than expected, and the market rises. In these examples, the market reactions were based not on the actual reports, but on how the reports are perceived relative to economic forecasts.

It's not uncommon for the jobs report to be buried by other news, which often results in little or no effect on the markets. The inherent volatility of the weekly data also suggests that other technical indicators and trend analyses may be more appropriate for determining market direction. If there is a consistent change in the moving average of at least 30,000 claims, many economists consider that as a sustainable trend in either direction.

The Bottom Line
The jobless claims should be viewed in the context of other economic indicators, and the trend is far more important than snapshot data points. As a general rule, the report will drive the markets to a greater extent when there are no other economic reports released that day, or when other reports are inconclusive about the direction of the economy.

These factors are important to keep in mind:

  • The advance report is often subject to subsequent revisions
  • Without other key data, the jobless claims statistics are not a reliable indication of economic health
  • There is no breakdown by industry or occupation
  • The raw results are distorted by the seasons, holidays and temporary workers

For the average person with a long-term investment strategy, the weekly jobs data should not be of significant concern. Instead, focus on the trend and how the data are validated by other information such as consumer confidence, unemployment rate, inflation rate, commodity costs, manufacturing data, retail sales, interest rates and GDP.

Catch up on the latest financial news; read Water Cooler Finance: More Spilled Oil, Fewer Jobs.

Related Articles
  1. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  2. Economics

    The Problem With Today’s Headline Economic Data

    Headwinds have kept the U.S. growth more moderate than in the past–including leverage levels and an aging population—and the latest GDP revisions prove it.
  3. Economics

    Explaining the Participation Rate

    The participation rate is the percentage of civilians who are either employed or unemployed and looking for a job.
  4. Economics

    What Qualifies as Full Employment?

    Full employment is an economic term describing a situation where all available labor resources are being utilized to their highest extent.
  5. Economics

    Explaining the Balanced Scorecard

    A balanced scorecard is a metric that measures a business’ performance.
  6. Forex Education

    These Are The Best Hours To Trade the British Pound

    The best times to trade the British pound are centered around economic releases at 1:30 am, 2:00 am, 8:30 am and 10:00 am U.S. ET.
  7. Stock Analysis

    The Best Stocks to Buy for Less than $10 before Year End

    Learn about the best stocks to buy under $10. These stocks are speculative but have considerable upside given their valuation and market conditions.
  8. Professionals

    Is it Time to (Finally) Push Kids Out of the Nest?

    Parents should make sure their kids realize their home is a launching pad not a landing spot, and advisors can help clients talk to their children.
  9. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
  10. Investing

    Finding Value in the Selloff Rubble

    Globally and in the United States, stocks are now in correction mode, with the recent erosion in equities in emerging markets and Europe in a bear market.
RELATED TERMS
  1. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
  2. Corporate Culture

    The beliefs and behaviors that determine how a company's employees ...
  3. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
  4. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  5. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  6. Ex Gratia Payment

    A payment made to an individual by an organization, government, ...
RELATED FAQS
  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  2. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  3. How does comprehensive income get reported on my 1040?

    As of 2015, on the standard IRS Form 1040, your comprehensive or total income is calculated through lines 7-22. This is different ... Read Full Answer >>
  4. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  5. What types of expenses are factored into autonomous consumption?

    Autonomous consumption is the level of consumption necessary to support everyday life in a zero-income scenario. Put another ... Read Full Answer >>
  6. Why is the employment figure important to a "dove"

    The employment figure is important to doves, because they are primarily concerned with the health of the labor market. Doves ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!