Data recently released by the Department of Labor demonstrates that unemployment continues to fall, signaling a strengthening in the economy. The number of claimants who filed unemployment claims for the first time are tracked week-by-week as a means of measuring how many people have recently lost their jobs at any given time.
Declining Unemployment: For the week ending March 10, initial unemployment claims declined by 14,000 claims, moving from 351,000 from the previous week’s figure of 365,000. The unemployment rate did not change, remaining at 8.3%. The insured unemployment rate was 2.6%, which represented a 0.1% decrease from the previous week’s 2.7% rate. The 2.6% figure is the lowest recorded during the current economic recovery. Ongoing unemployment claims also decreased by 81,000 claims for a total of 3.3 million.
The news is a positive indicator of continued economic recovery and boosted investors’ confidence in the economy. The initial claims figure helped to raise the Standard & Poor Index above 1,400 for the first time in nearly four years, closing at 1,402.60 on March 15, the day the report was released. The S&P is up 12% for the year so far. The decline in unemployment has been accompanied by an increase in consumer spending and an improvement in wage amounts for those people who are employed.
Why Consumers Care: The rate of initial jobless claims is a strong indicator for the health of the employment market – which, in turn, is a big factor in the health of the economy as a whole. People who lose jobs tend not to spend a lot of money, so a high employment rate results in lower consumer spending, which slows the economy. When people have jobs, however, they spend money, which lubricates all the economic wheels. Investors make decisions about where to invest based on their predictions of the economic situation. So, the jobless claims rate has a ripple effect throughout the economy.
Chart courtesy of Bloomberg.