Are jobless claims peaking?
Tomorrow, we all await the unemployment number with anticipation. In all likelihood, it is going to be a nasty number edging us ever closer to the 9.0% I once saw as a sort of upper range number for 2009.
Meanwhile, jobless claims for the week ended March 28 are out. The reported numbers of 669,000 initial jobless claims and 5.7 million continuing claims are both seasonally adjusted (SA) and they are both high than the previous week. 4-week SA averages are also higher.
On digging deeper, here is my analysis:
Looking at the non-seasonally adjusted (NSA) numbers, things actually look a bit better. Initial claims rose from 590,000 to 594,000 claims while continuing claims fell by 70,000 to 6.37 million. (Click here to see why I do not use the reported SA numbers.)
But, I actually like to look at trends, so I am taking the 4-week NSA number and comparing it to last year. Below is the chart.
As you can see, the graph clearly indicates that the change in initial jobless claims has peaked (temporarily?). These peaks are not lagging indicators, they are usually coincident or leading indicators. Here are the dates and numbers for peaks in changes in initial claims going back to 1967 when the data began:
- 5 December 1970 at 120,000 (the recession ended in November 1970)
- 1 Feb 1975 at 361,000 (the recession ended in March 1975. Note: Apr-Jun 1974 showed positive GDP growth)
- 7 Jun 1980 at 238,000 (the recession ended in July 1980. Note: this was the first in a double dip recession)
- 30 Jan 1982 at 202,000 (the recession ended in November 1982. Note: Apr-Jun 1982 showed positive GDP growth)
- 23 Mar 1991 at 154,000 (the recession ended in March 1991)
- 20 Oct 2001 at 165,000 (the recession ended in November 2001)
I hope this makes it pretty clear that the last few recessions show changes in initial jobless claims as a coincident or leading indicator. Moreover, the peak in this cycle right now stands at 327,000 on 31 Jan 2009, which was 2 months ago. Today, we are at 275,000, quite a bit lower. Now, unless the SA weekly initial jobless clams start hitting 700,000 – 800,000 this spring and summer, we have already seen the peak here.
I should also point out that changes in the unemployment rate and initial jobless claims are also not the lagging indicators that the unemployment rate itself should be considered.
So, is this a pause in the data? It is hard to say, honestly. But, my sense from previous cycls is that we have seen the peak here. But, this is a completely different economic cycle, the likes of which we have not seen in quite a while. So, the data comparisons back to 1967 could be misleading. And maybe layoffs at a bankrupt Chrysler or GM will make things much, much worse – something that the Obama team should remember when those deadlines come due.
I point all of this out because the punderati in the econblogger space is very negative these days, but the data are not all pointing in that direction.
Unemployment Insurance Weekly Claims Report – U.S. Department of Labor