Forex Walkthrough

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Level 5 Economics - Jobless Claims Report

As opposed to the Labor Report, the Jobless Claims Report is a weekly release that reports the number of first-time filings for state jobless claims across the nation. The data is seasonally adjusted, since certain times of the year are known for above-average hiring for temporary work, such as during harvesting and holidays.

Release Date:
Weekly; Thursdays, prior to market open
Release Time:
8:30am Eastern Standard Time
Coverage
Previous week (cutoff date is previous Saturday)
Released By:
U.S. Department of Labor
Latest Release:
http://www.dol.gov/opa/media/press/eta/main.htm


Due to the short sample period (one week), week-to-week results can be very volatile, therefore the results are often presented as a four-week moving average, so that each week's release is the average of the four prior jobless claims reports, making it easier to compare the figures. The release outlines which states have had the largest changes in claims from the week previous; the fully revised version shows up about a week later, at which time full breakdowns by state and U.S. territories are available.

What it Means for Forex Traders
New jobless claims for the week reflect an up-to-the-minute account of who is leaving work unexpectedly, showing the "run rate" of the economy's health with very little lag time. The Jobless Claims Report gets a whole lot of press because of its simplicity and the belief that the healthier the job market, the healthier the economy, and the stronger the dollar

The fact that jobless claims are released weekly is of particular importance to forex traders. Having such a reliable and timely report of how the U.S job market is faring can give traders a heads up to the long-term direction of the dollar along with the luxury of intra-day trading with fresh economic data.

At times the Jobless Claims Report can also get lost in the shuffle of a busy news day, and hardly be noticed by the general public. Good forex traders however will make it a point to add the report to their economic calendar and keep a close eye for what to expect in the U.S job market.

Strengths Of The Jobless Claims Report:


  • Weekly reporting provides for timely, almost real-time snapshots.
  • As a tightly-presented release, investors can easily pick up the raw release and quickly apply the information to market decisions.
  • Initial claims are provided gross and net of seasonal adjustments, and give a breakdown for every state's individual results.
  • Some states' figures are shown along with a comment from that state's reporting agency regarding specific industries in which noteworthy activity is happening, such as "fewer layoffs in the industrial machinery industry".

Weaknesses Of The Jobless Claims Report:


  • Summer and other seasonal employment tends to skew the results.
  • Highly volatile - revisions to advance report can be very big on a percentage basis
  • Jobless claims in isolation tell little about the overall state of the economy.
  • No industry breakdowns are provided, just the national figure.

These two unemployment reports are the most followed by forex traders across the globe. Quite often the U.S. economy is the engine that drives the global economy, and any changes, good or bad, in overall employment can have a big effect on the forex markets. Keeping up to date on both of these important economic reports are crucial to becoming a smart and informed forex trader. Next let's study how interest rates effect currencies. (To learn more, see our CFA Level 1 Tutorial: Types of Unemployment.)

The Fed
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