The Initial Jobless Claims report is a U.S. document that tracks the number of people who filed for state unemployment insurance for the first time in the previous week. There are two categories of jobless claims: Initial claims and Continued claims. These categories represent the total number of individuals who applied for unemployment insurance during a specific week.

The report is issued weekly by the Employment and Training Administration of the Department of Labor, with updates available every Thursday. Continued Jobless Claims reflect the number of individuals who have already received unemployment benefits and are continuing to apply for them. The report provides data from the week prior, concluding on the Saturday before its release.

What is Initial Jobless Claims? The Initial Jobless Claims report, also referred to as the Initial Claims report, measures the number of individuals who have filed for unemployment benefits for the first time. An initial claim is submitted by an unemployed person following their separation from an employer, serving as a request to determine eligibility for the Unemployment Insurance program. The claims filed by newly unemployed workers are included in the Initial Jobless Claims report.

What is Unemployment Insurance? Unemployment Insurance (UI) offers unemployment benefits, typically in the form of weekly payments to eligible workers. UI is managed collaboratively by the U.S. Department of Labor and individual states, with each state creating its own system for distributing benefits. According to the U.S. Department of Labor, to qualify for unemployment benefits, individuals must:

• Be unemployed through no fault of their own.
• Meet specific state eligibility criteria.

States have varying requirements for unemployment recipients to demonstrate their readiness to work while being unable to find a job. It is important to note that not everyone who applies for unemployment insurance is approved, meaning that jobless claims do not necessarily indicate the number of people who will actually receive benefits.

Local employment offices send their insurance claims data to state employment offices, which then compile the information and forward it to the U.S. Department of Labor. The Department of Labor subsequently releases this newly collected data to the public every Thursday. This figure can serve as an indicator of the economy's health.

Why is the Initial Jobless Claims report important? Due to its weekly frequency, the Initial Jobless Claims report offers insights into the job market. It is considered a leading economic indicator because there is typically an inverse relationship between initial claims and employment. When initial claims decrease, the employment rate tends to rise, which can signal increased disposable income and higher consumption (more spending on goods and services), leading to stronger economic growth. Conversely, when initial claims increase, the employment rate usually declines, indicating lower disposable income and reduced consumption, which can result in weaker economic growth. This report can provide early warnings and alert traders and investors to changing job market conditions.

When analyzing the Continuing Jobless Claims figures, it is crucial to remember that not everyone who is unemployed is eligible for unemployment benefits.

How to read the Initial Jobless Claims report: The initial jobless claims figure is compared to consensus forecasts. A better-than-expected initial jobless claims reading (known as a “beat”) indicates a lower figure than the market consensus, while a worse-than-expected reading (known as a “miss”) signifies a higher figure than the consensus. The market's reaction to the initial jobless claims reading depends on the current economic climate and its potential impact on future monetary policy by the U.S. central bank or fiscal policy by the U.S. federal government. Generally, the market reacts positively when initial jobless claims are lower than anticipated.

A change of at least 30,000 claims up or down is considered significant, while anything less is viewed as normal fluctuations. A sustained increase in the number of individuals filing for unemployment benefits or a relatively high figure suggests that many people are losing their jobs and seeking unemployment insurance. A significant rise in these claims could indicate slowing job growth as unemployment increases. In such cases, investors and traders may conclude that the economy is struggling, and the next Non-Farm Payroll (NFP) report may be weak. Conversely, a decline in Initial Jobless Claims suggests a healthy economy, and future NFP reports should reflect a more positive outlook. A substantial decrease can indicate that the economy is experiencing job growth and is in good shape.

The report also includes a four-week moving average to help smooth out claims data, as week-to-week changes can be volatile. Most analysts consider a four-week moving average exceeding 400,000 claims as a sign of economic weakness. Increases in new claims over several months often predict a decline in GDP growth. Regarding Continuing Jobless Claims, a rise in this number has negative implications for the NFP, as it can impact consumer spending and hinder economic growth. Generally, a high reading is viewed as negative for the labor market, while a low reading is seen as positive. A Continuing Jobless Claims figure above 3 million is considered concerning.

When workers begin filing for unemployment insurance, traders anticipate an economic slowdown and tend to buy government bonds, which drives interest rates lower. Lower interest rates may weaken the U.S. dollar, depending on the relative strength of the U.S. economy compared to other countries. For instance, even if the employment situation in the U.S. is deteriorating based on the Initial Jobless Claims report, if the employment situation is worse in other countries, the U.S. dollar may remain stable or even strengthen.

Where to find it? You can locate the Initial Jobless Claims event listing on BabyPips.com’s economic calendar.

What time is it released? The Initial Jobless Claims report is released weekly on Thursdays at 8:30 am ET.