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Economic indicators - J

Jobless Claims

Jobless Claims represents number of individuals who filled for unemployment insurance for the first time.

It is very easy to see how this factor shows the strength of the market: the less people without jobs, the more income, which gives a household spending power. Spending is highly correlated with growth of the economy, so the stronger the job market, the healthier the economy. On the other hand, if the number of job seekers fall to such a low level that businesses have a tough time finding new workers, investors might have to pay overtime to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This would also lead to wage inflation and can weak economy and currency strength.

By tracking the number of jobless claims, investors can gain a sense of how tight the job market is. Lately, there is general problem with unemployment. As a result, the rule is the lower the number of unemployment claims, the stronger the job market and vice versa.

A level above 400,000 signals a particularly weak labor market and a probable recession, whereas a figure below 300,000 suggests a strong labor market and the need for higher interest rates.