Release Explanation: This report provides the number of people claiming new unemployment benefits and the number of people who are continuing to claim unemployment benefits. Both metrics are provided in weekly and in 4-week moving average form. Very important that economic forecasts are based on the labor market. Economic strength builds from the willingness/confidence of firms to hire, without a strong labor market growth is hard to achieve. Over time the Employment Data will affect all economic releases, it does however take time for labor trends to form. A currency will strengthen or weaken in-line with the other releases that the Employment Data impacts, rather than as a knee-jerk reaction to these numbers printing. Economists tend to look more at the 4-week numbers because weekly numbers can be volatile although the market reacts to the headline numbers initially.
Trade Desk Thoughts: The number of workers making claims for new unemployment benefits declined by 31,000 to 639,000 last week, the Labor Department said today. Economists had expected to see 647,000 new claims.
The four-week average, which aims to smooth volatility in the data, rose 2,000 to 641,750, the highest since October 1982.
The increasing numbers of new claims in February indicates there's a chance to see the unemployment rate in Friday's NFP report reach 8%, said Matthew Carniol, chief currency strategist at TheLFB-forex.com. With the Fed expecting that employment will remain weak through 2011, expect to see consumption do likewise.
The number of workers continuing to claim benefits fell by 14,000 to 5,106,000. The previous week's number was the highest in the series, which began in 1967. In the past year, continuing claims have risen by more than two million. The 4-week moving average of continuing claims increased by 76,750 to 5,011,000.
The unemployment rate for insured workers remained at 3.8%.
The U.S. has lost 3.6 million jobs since the recession started in December 2007, with about half of those losses coming in the last three months alone including the largest monthly drop in over 30 years last month. The unemployment rate currently stands at a 16-year high of 7.6% but when taking into account those working part-time because full-time work isn't available along with workers who have given up on looking for employment, the percentage of unemployed rises to 13.9%.
Forex Technical Reaction: S&P futures were trading lower by 1.58% and the dollar was higher against the (slightly) better-yielding euro, pound and Australian dollar prior to the report. Futures declined to near-session lows afterwards, and the dollar continued gaining against the better-yielders.