The US economy firing on all cylinders? Hardly

In the week ending February 27, the advance figure for seasonally adjusted initial claims was 745,000, an increase of 9,000 from the previous week’s revised level. The previous week’s level was revised up by 6,000 from 730,000 to 736,000. The 4-week moving average was 790,750, a decrease of 16,750 from the previous week’s revised average. The previous week’s average was revised down by 250 from 807,750 to 807,500.

– US Department of Labor email on jobless claims, 4 Mar 2021

I got this email on jobless claims from the US Labor Department as I do each week just after 8:30 AM ET. And when I saw the numbers, it confirmed for me that we are generally on a downward trajectory for claims. This is a data series I have been tracking for the past two decades, through the end of three business cycles. It’s been around since 1967.

But the number is so high a full year after the virus hit thought I felt like I needed to put in context for you. I feel like we’ve become inured to the mind-boggling numbers of this cycle. So I wanted to chart it for you. I used to do the charts myself. But the St. Louis Fed’s datasets are so good I will use them.

This is the first chart I saw when pulling up their website:

Notice the step change in scale to accommodate this past recession. Let me remove the post-March 2020 data and show what the numbers used to look like.

That’s quite a bit different. And if you squint, you can see the chart redlining around 700,000 claims in the figures for the double dip recession of 1980-82 and again during the Great Financial Crisis.

In fact, the maximum 4-week average figure was 674,250 for the week ended 9 October 1982 up until 21 March 2020 when the average surged to 1,004,250 and later topped out at 5,790,250. That’s an order of magnitude worse than anything we’ve seen in over 50 years.

The absolute pre-pandemic peak in initial claims came a week prior to the 4-week average peak, on the week ending 2 October 1982. We saw 695,000 seasonally-adjusted claims that week. The peak this cycle was 6,867,000 in the week ending 28 March 2020. Again – an order of magnitude higher.

And so, here we are one year into this pandemic where both the level and the 4-week average numbers are higher than the absolute peak in any previous cycle. Not once post-lockdown during this pandemic has the one -week or four-week initial claims level been lower than the absolute highest level of all previous data.

(By the way, the lowest numbers in the post-lockdown era for one week are 711,000 and for the 4-week average, 740,000.)

So, the US economy is not firing on all cylinders, not by a long shot. I know we are about to see some off-the-charts growth in the real GDP numbers. But, that’s not the full story. A lot of people are hurting. And so, we have a lot of work to do until these initial claims numbers fall considerably. Let’s not forget this.