Jobless claims rise 30,000 from artificially low number

When last week’s US jobless claims number was released, I indicated it was artificially low because of changes in the summer auto production schedules.  Rather than look at the numbers as they are released from week to week, we should look at the 4-week moving average and its comparison to previous periods to gauge the trends in the employment market.  Overall, the trend in jobless claims shows a slowly declining but still very elevated number of layoffs, meaning the employment market is still weak and is not supportive of increases in end consumer demand.

The numbers released today show 554,000 new claims and 6.2 million continuing claims for unemployment insurance.  This puts the 4-week average at 566,000 for new claims and 6.5 million for continuing claims, levels that have traditionally been consistent with recession.  To see consistent job growth we would need to have claims drop by at least another 100,000 per week.

On the other hand, most of the trend measures I track show significant improvements on a seasonally adjusted and unadjusted basis.  The two measures I would like to highlight are the year-on-year unadjusted initial claims and the six month adjusted initial claims.   The year-on-year number is down to 181,000 from a peak of 327,000 in January. The six-month number is now down to 39,000, below the 50,000 level I have generally used as my alert line to anticipate expansion and contraction. However, I would add that year-on-year continuing claims comparisons show over 3 million more people collecting unemployment insurance than at this time last year.

So, the trend is pretty clearregarding unemployment claims: they are headed down.  But, the absolute level of claims does not suggest recovery is necessarily at hand.  When we break below 500,000, or better yet 450,000, we should be able to signal all clear.

Sources

Unemployment Insurance Weekly Claims Report – US Department of Labor