Top Economic Indicator
Why jobless claims are particularly relevant today
Early this fall, jobless claims (applications for unemployment benefits) fell back into the normal range of 300,000–325,000, implying that the economy is in full recovery mode. Jobless claims figures provide telling and reliable insight into the direction of the economy for a number of reasons:
Virtually all businesses belong to the unemployment insurance system. As a result, any layoff across the country will be reflected in the jobless claims figures. In contrast to indicators like GDP, jobless claims do not reflect estimates for hard-to-cover sectors. They represent the actual count of all applications for unemployment benefits. While many indicators are updated as new information becomes available—sometimes for years after—jobless claims figures will stand in the history books as they are now reported.
It’s simple—jobless claims track layoffs. And even though that’s only one small part of the big picture, they are strongly correlated with the recalls, net job growth and the pace of economic activity.
In a world of monthly and quarterly indicators, jobless claims release on a weekly basis. For those of us interested in having a finger on the pulse of the economy, it may be one of the best options.
No indicator is completely comprehensive for capturing an accurate view of the market. For instance, jobless claims don’t reflect the hiring of people with no previous work experience, as they wouldn’t qualify for unemployment insurance benefits. For this, you would look to net employment, which reflects the difference between layoffs and recalls.
But if you want a single indicator that’s timely, comprehensive and not an estimate—jobless claims are a good place to look.
Meet the Author
As Managing Director and Head Economist for Chase Commercial Banking, Jim Glassman provides market insights to help clients better understand the changing economy and its impact on business. A publisher of independent research on the principal forces shaping the economy and financial markets, Glassman is regularly cited in the financial media, where he is also a frequent commentator on economic policy issues.
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