How the Number of Jobless Claims Affects Investment Markets (Forex Education)

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By Rahul Jain | August 27, 2010 3:31 AM EST

When listening to the news, you often hear figures about the number of jobless claims. If you happen to be an investor in one of the investment markets like the stock market or the Forex market, that bit of news (often available on most online Forex trading system platforms) can have a direct affect on your trading strategies. The number of jobless claims, just like other economic news such as the number of new housing starts or the current GDP figures, can influence an investor's strategic trading plan for any given time period.

What does the number of jobless claims actually represent?

The number of jobless claims represents those people who actually filed for unemployment insurance for the first time in order to receive jobless benefits. Since it only includes first time filers, it really has its fingers on the pulse for the direction that the economy is taking. If the number of jobless claims increases, that means that job growth has slowed down. On the other hand, if the number of jobless claims decreases, that means that the economy is growing up. It is therefore a true leading indicator, since it foretells the direction of the economy.

How Often Is the Report Published?

The job claims report is published on a weekly basis (every Thursday). Since it's published so often, it's a real strong indicator for things to come. As far as numbers, a weekly change of 30,000 or more job claims represents real up or down change. For example, if the number of job claims decrease by 35,000 during a one-week period, then the economy is showing real job growth, and therefore a strengthening of the economy.

Pros and Cons of the Report

The jobless claims report provides both advantages and disadvantages for an investor's strategic planning. As far as its advantages, the jobless claims report is extremely timely and provides snapshots of the health of the economy throughout any given time of the month. It can really capture trends before most other economic indicators. On the other hand, the jobless claims report can provide possibly misleading information during such times as holiday periods and summer months, as more people tend to be hired for part-time work. This report should also not be taken in isolation; it needs to be reviewed in context with other economic indicators.

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