Leap in jobless claims is an ominous signal
This morning, I left just in time to see the U.S. Department of Labor’s jobless claims numbers for the preceding week. They were not good. Initial claims hit 480,000 for the week ending 30 Jan 2010, pushing the 4-week average up to 468,750.
As a result of this news and sovereign debt issues in Europe, stock markets have sold off across the board. People are waking up to the lingering fragility of the global economy.
On jobless claims specifically, I have been writing rather downbeat posts since the new year began. The data are simply not good. For example, regarding seasonally adjusted initial jobless claims, last week I said:
two weeks of back to back elevated numbers demonstrates that these numbers bear watching going forward. Average jobless claims are more stable than week-to-week numbers so, the rise of 15,500 is significant in the context of what has been a downward trend.
To put the rise in perspective, the last time we saw an uptick in the average number of 15,000 or more was February of 2009 at the depths of the downturn.
This week’s increase puts that same seasonally adjusted 4-week figure up 28,000 in a three week period. That is a very large countertrend uptick which I find very worrying. Putting this uptick in perspective, you still have to go back to March of 2009 to find a three-week stretch where claims were rising by so much. We are talking about a mere three week trend. Nevertheless, it is such an abrupt upshift that I do think this 4-week average initial claims number bears watching – especially because hiring has been anaemic, causing a record number of people to file for extended benefits. The 5.6 million people on extended benefits puts the unemployment payrolls at a record 11.2 million. That’s enormous.
Unless claims stabilise and resume their prior downward path, this incipient technical recovery will be history. A second recession will ultimately be much worse than the first.