What are jobless claims, and why do they matter?

Yahoo

3 days ago

Jobless claims reports can signal changes in the U.S. economy that affect your household, wealth, and income potential. Understanding jobless claims data and its implications can help you make better financial decisions.
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Jobless claims are an economic statistic measuring how many people filed for unemployment benefits. The Department of Labor (DOL) reports jobless claims weekly, usually on Thursdays. The report typically includes weekly initial claims, a four-week moving average for initial claims, the insured unemployment rate, and continued claims. Here's what those terms mean:
Weekly initial claims. Initial claims are new unemployment filings received in the prior week from people who were not already receiving benefits.
Four-week moving average for initial claims. The weekly initial claims total is watched closely because it can signal changing dynamics in the U.S. labor market. However, this data can be volatile. So, the DOL also provides an average of initial claims over the prior four weeks. The four-week moving average smooths out weekly anomalies for easier trend identification.
Insured unemployment rate. The insured unemployment rate is the number of workers claiming unemployment benefits divided by the number of workers covered by unemployment insurance. This value is presented as a percentage.
Continued claims. Continued claims are unemployment filings from people who were already receiving benefits. This number is typically much larger and less volatile than initial claims.
The DOL adjusts jobless claims data to eliminate predictable seasonal patterns, which can mask underlying trends. The jobless claims report includes adjusted and unadjusted data.
Big changes in the number of initial jobless claims can coincide with an evolving job market, which has implications for the broader U.S. economy. Because the initial claims reading is an early sign of changing conditions, it's considered a predictive value, also known as a leading indicator.
According to a 2025 analysis from the St. Louis Fed, a threshold number of initial jobless claims predicted a changing labor market. More than 434,165 initial claims can precede deteriorating conditions, while fewer than 434,165 claims point to an improving job market ahead. The analysis also concluded that the threshold is more informative when the economy is improving than when it is declining.
In March 2020, weekly initial jobless claims jumped from 273,000 to 2.9 million in one week as the pandemic forced temporary business shutdowns. In the next month, the unemployment rate spiked to 14.8% from 4.4% in March.
On the backside of the pandemic, weekly initial jobless claims remained above 300,000 until October 2021. In that month, the unemployment rate was 4.5%. The rate continued to decline until it reached 3.5% in January 2023.
A deteriorating job market marked by higher unemployment can prompt other negative outcomes, including:
Lower household income
Declining consumer sentiment and spending
Conservative business outlooks and reduced business spending
Lower production growth
In other words, a sustained increase in initial jobless claims can be an early sign of a slowing economy. This is why economists and analysts watch the jobless data closely. As an example, the Leading Economic Index (LEI) by independent think tank The Conference Board analyzes weekly initial jobless claims along with nine other values to predict recessions and expansionary periods.
Weekly jobless claims reports can affect stock prices, particularly when the data differs from prevailing expectations. A better-than-expected jobless claims report can encourage higher stock prices and vice versa.
To be clear, a positive initial claims reading is lower than expectations, and a negative reading is higher than expectations. For example, say the consensus expectation is 270,000 initial weekly jobless claims. A report of 170,000 initial claims would be well-received by investors, but 370,000 claims would be disappointing. These results could contribute to higher or lower stock prices, depending on other economic and geopolitical news.
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In the U.S., individual states manage unemployment benefit programs. The states share their claims data with the DOL through the Unemployment Insurance Data. The DOL accesses the information, aggregates it, and calculates the seasonal adjustments to produce the weekly job claims report.
The DOL can also revise the jobless claims data after its release. For example, the adjusted and revised initial jobless claims reading for a week could be 248,000 after initially being reported as 247,000.
The Bureau of Labor Statistics (BLS) splits the workforce into two groups: the employed and unemployed. Only these two categories of workers are considered in the unemployment rate and other workforce statistics. The BLS further defines unemployed workers as those who don't have a job but are available for and actively seeking employment.
Jobless, on the other hand, describes not having employment. This includes those who don't want a job or cannot work due to health or other limitations — two populations the BLS excludes from the workforce. Someone who is not part of the workforce cannot technically be unemployed.
In short, all unemployed workers are jobless, but not all jobless individuals are unemployed. Jobless individuals who aren't looking for work can apply for unemployment benefits, but these claims are usually denied. All states require unemployment compensation beneficiaries to prove they are actively engaging in a job search.
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Tim Manni edited this article.