NEXT UP: Are jobless claims the new payrolls?
NEW YORK (Reuters) - Weekly jobs data normally play second fiddle to the broader monthly employment figures, but the Federal Reserve's renewed focus on the most up-to-date indicators could change that tune.
The payrolls report might get a run for its money as the mother of labor market numbers, analysts say, particularly if a spike in the number of Americans filing for unemployment benefits seen last week persists.
"The recent uptrend in unemployment claims has almost certainly caught the Fed Chairman's eye," said Thomas Higgins, chief economist at Payden & Rygel.
A crisis in the credit markets is largely responsible for this shift. A debacle that began with rising defaults in high-risk subprime mortgages has since spread to other areas of finance, crimping lending and stifling companies' ability to fund their day-to-day operations.
This makes it all the more difficult for officials at the Fed to determine whether the economy is weakening rapidly enough to warrant a cut in interest rates.
Across the financial world, investors honed in on one particular snippet from Fed Chairman Ben Bernanke's Jackson Hole speech last week: "We will pay particularly close attention to the timeliest indicators."
That means jobless claims, usually a second-tier statistic, could take on a whole new level of importance. They might also affect the way analysts look at payrolls.
"Both initial and continuing claims have now risen to their highest levels since mid-April and will be watched carefully in the coming weeks," said Robert Mellman, economist at J.P. Morgan. "Recent layoffs in the mortgage industry may have lifted claims."
Economists are generally looking for a small pullback in claims following the prior week's jump, but expect continuing claims to hold around 2.58 million.
Any further rise in the weekly number, which came in at 334,000 last week and is due out on Thursday, could send stocks lower and put another bid into the bond market.
A big reading could also diminish the impact of a stronger jobs report on Friday, since that would be seen as telling only half the story, and a backward-looking one at that. Put another way, robust hiring would provide little comfort alongside data showing many are also being fired.
