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Initial claims are important data for assessing the condition of an industry or economy. Investors use them to predict job growth and make investment decisions. Unemployment benefits are provided at the state or provincial level, and tracking initial claims can provide clues about the economy in a particular region. Rising unemployment in a sector can negatively affect the value of shares issued by companies in that sector. Investors in the FOREX market also monitor trends with initial claims to determine how to trade currencies. However, initial claims are not the only indicators used to predict market movements or the general health of an economy.
Initial claims are unemployment benefit claims paid to those who have recently lost their jobs due to the elimination of their positions or some other factor that led to the termination of their employment. Data of this type are important when it comes to assessing the condition of an industry within a national economy or even the general economy itself. Investors often look closely at the number of initial claims filed from one period to the next as a way to understand the current state of the economy and predict future trends with job growth. This often generates useful data for making short-term and long-term investment decisions.
In many countries, unemployment benefits are provided at the state or provincial level. It is in this context that data relating to initial claims are maintained and tracked. In terms of using these claims as one of several business cycle indicators, tracking initial claims in an adjacent state or group of states can often provide clues as to what is happening to the economy in that particular region of the country. The results can also provide the basis for comparing unemployment trends in other parts of the country to determine whether similar circumstances are producing the same type of trend with job losses or even job creation in emerging industries.
For investors, tracking initial claims from one period to the next provides data on how certain sectors of the market are moving. Since rising unemployment in a given industry indicates that companies in that business sector are likely to suffer some profit losses, this leads to the logical conclusion that the value of shares issued by these companies can be negatively affected. Identifying such situations can make it much easier to limit investments in these industries and thus minimize the potential for portfolio losses.
Investors involved in the foreign exchange or FOREX market will also monitor trends with early claims. This is because an increasing number of claims are likely to have some impact on the value of that country’s currency on the world market. As the currency appreciates or depreciates in relation to the unemployment rate, currency trading investors can use the data to determine how to go about trading the currency to the best effect, based on what is happening in other countries to affect the value of your coins.
It is important to note that opening claims are not the only indicators used to predict market movements or even the general health of an economy. In situations where emerging technologies are replacing older ones, it is not uncommon for unemployment to rise as a portion of the workforce is displaced by these new technologies. As displaced employees are trained to take on tasks relevant to the new business models, the number of initial complaints per period begins to decrease and the balance of the economy is restored. During this period, the impact on the overall economy may be minimal, especially if displacement is limited to a particular sector and affects workers in a small region of the country.
Asset Smart.
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