Jobless claims: 654,000 means flow is static, stock is up

Initial jobless claims for the U.S. came out today for the week ended March 7th and the number was 654,000, up from an upwardly revised 645,000. This puts the widely quoted 4-week average at 650,000, a business cycle high. All numbers reflect seasonal adjustments.

The real story was in continuing claims. There we saw a rise to 5.3 million from 5.1 million, suggesting those who are unemployed are finding it difficult to get a new job. Just six months ago, this figure was 3.4 million.

My take on the figures goes to the concept of stock and flow. The stock is the number of unemployed on the jobless roles. The flow is the number of people filing new claims. When it comes to calling recessions, I am usually more interested in the flow i.e. initial claims because it is an increase in the flow that is the coincident or even leading indicator of recession. This is true for jobless claims as much as it is true for the unemployment rate. However, the stock is a lagging indicator that does not signal a turn in the economy.

What is interesting about these numbers is the divergence in stock and flow. The flow is rather static (i.e. when one compares unadjusted claims to last year’s numbers). We’re talking about an increase in a year’s time of about 300,000 since mid January. On the other hand, the stock is mushrooming; there are 2.8 million more people on jobless roes than at this time last year. In mid-January that number was 2.1 million. 6 months ago it was 800,000.



What is also interesting here is that the stock is MUCH higher on an unadjusted basis than on a seasonal basis (6.4 million vs. 5.3 million and a 12-month change of 2.8 million vs. 2.4 million). These numbers indicate that the unemployment rate will rise dramatically in coming months, more than is anticipated. In my view we will print a 9% number by the summer.

Given the Obama Administration’s plans are predicated on an average of 8.1% unemployment for 2009, we will probably see a need for more stimulus down the line.

Unemployment Insurance Weekly Claims Report – U.S. Department of Labor

  1. Mac says

    Think all attention should be paid to the N SA data set now given this is a once in 50 year type occurance and any sseasonal effect was swept away couple 100,000s ago.
    The NSA is now over 700,000 and obviously uni-directional.

  2. Edward Harrison says


    you and I are on the same page here. The seasonally-adjusted data is fooling people into thinking the claims data is lower than it actually is. I have been detailing this for weeks now. It does look like the initial claims data is finally playing a bit of catch-up. But, the continuing claims data is still very deceptive. I think most people will be surprised when we print 9% so soon.

  3. Ranger Turtle says

    I don’t have the data, but I think that extending unemployment recently must have an effect on the acceleration of the continuing claims number.
    Like Mac & Edward above though, I think the numbers are low.

  4. Edward Harrison says

    Ranger Turtle, that is definitely the case about the continuing claims numbers going up. What is more important is what Mac points out: seasonal adjustments are distorting the data. This is something I have noticed since say December because there are huge seasonal adjustments from December-March.

    Starting next month we should get a more accurate picture of what’s happening. In the meantime, the NSA data is the best gauge of events.

Comments are closed.

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