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Deciphering Employment Data
By: iStockAnalyst   Wednesday, August 8, 2007 10:42 PM
The reason being is that Initial Claims gets posted by the U.S. Department of Labor every Thursday morning versus the Unemployment Figures which come in around the 7th of the month. By the time the 7th of the month comes around, you and everyone else should have a ballpark idea of whether the Unemployment Figures will be good, bad, or ugly. However, keep in mind, the market does not like surprises often, and if the Unemployment Figures differ from what is anticipated, then you may see a little increased volatility in response to the numbers. In reviewing Initial Claims, be sure to look at a long-term moving average versus short-term stats. Otherwise federal and state holidays tend to distort the picture. Good rule of thumb in reviewing this data is that there is an inverse relationship between Initial Claims and Non-Farm Payroll. Higher payrolls can result in higher consumption, and, left unchecked, this increase could cause some inflationary pressure.

Job Growth

Job growth is among the most pivotal numbers in understanding consumer sentiment. A booming job market results in more confidence among consumers. If there is significant contraction, you will hear about it because it could be an indicator of a slowdown. Too much accelerated growth and you may see some inflationary pressure as the demand for workers increase, setting in motion higher starting wages and salaries.

Help Wanted Index

On the last Thursday morning of the month, Conference Board posts an index of monthly help-wanted ads in 51 major newspapers across the U.S. This is a good coincidental indicator of strength in labor markets. Analysis is pretty simple here. A large or increasing number of ads indicate a strong labor market and wages and salaries will have to increase for firms to be competitive. This would also drive up regional consumption, indicating prosperous times for those businesses well positioned in those regions. Conversely, a small or decreasing number of ads regionally would not bode well for those economies.

Comprehending Employment Data is only one of many tools you will need to develop an accurate economic forecast. These statistics can be viewed from many different angles and its interpretation will vary from investor to investor. Clearly understanding how the numbers break down, what regions are to be impacted, and what companies will be affected is crucial to staying ahead of the pack.

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