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Thursday, November 13, 2008

Jobless Claims

Jobless claims come out today.

Jobless claims is a number put out by the Department of Labor, stating how many people applied for unemployment insurance over a week. The reason that jobless claims numbers are so important is because it can indicate a direction for the market. This movement can be dramatic when the number of people filing increases dramatically. People without jobs tend to have less money to spend. The decline in consumption can reduce sales throughout the economic spectrum, which reduces profitability, and therefore hurts businesses. Lower profitability can mean markets decline as some investors find alternative methods to invest other than equities. At the same time, those without jobs, need money, so they may raid their retirement plans for funds, which can drive markets further down as mutual funds sell shares to cover these redemptions. Initial claims are the most watched of the jobless claims numbers, because those represent the newest people filing for unemployment. These are the people that just lost their jobs.

The last report by the Department of Labor had the 4-week average number of initial claims at 477 thousand, and the total non-adjusted number of unemployed persons was 3,319,936. The average number of initial claims expected this week according to Bloomberg.com is a whopping 482 thousand, while Yahoo Finance has a slightly lower number of 479 thousand. Either way, it's pretty dismal. Anyway, let's hope that the numbers aren't worse than expected.

For more information about jobless claims, visit Bloomberg here.

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