U.S. Initial jobless claims fell a massive 94,000 to end the year at 492,000 last week. It was nice to see a sub 500,000 jobless claims number to end the year after an ugly November and December. However, one should note that the fine print is not as good because this number was completely dominated by seasonal adjustments. The actual unadjusted number of 718,468 was actually higher than last week’s actual unadjusted 716,576.
Here is how Reuters reports it.
The number of U.S. workers filing new claims for jobless benefits slumped 94,000 last week, government data on Wednesday showed, but seasonal factors were likely behind this unexpectedly large decline with the labor market remaining very soft.
Initial claims for state unemployment insurance benefits fell to a seasonally adjusted 492,000 in the week ended Dec 27 from an unrevised 586,000 the prior week, the Labor Department said. It was the lowest reading for initial claims since the week ended November 1, 2008, and the steepest decline since 1992.
Prices on U.S. government bond extended losses on the larger-than-expected drop in claims.
Analysts polled by Reuters had forecast 565,000 new claims as the country’s year-long recession continued to chill employment, and a separate reading on so-called continued claims hit a 26-year high.
A Labor Department official said the timing of the year-end holidays and volatility in factors used to seasonal adjust the data was likely to blame for the large decline in initial weekly claims, and he warned this situation could persist for several more weeks.
“The numbers seemed unbelievable but the states certified they were correct,” the Labor Department official said.
The numbers are indeed unbelievable. Why? The seasonal adjustment factor for initial claims was 145.9, where 100 means the adjusted and unadjusted numbers are the same. That means taking the real number and dividing it by 1.459. That’s a huge adjustment.
If you look at the chart below, which strips out these anomalies by comparing the 4-week average unadjusted numbers to last years numbers, you can see that the comparisons are at their worst for this cycle.
The long and short of it is that the numbers are skewed by seasonal adjustments and do not represent the picture on the ground. In reality, the U.S. job market is looking bleak.
Sources
Jobless claims drop by much more than expected – Reuters
Unemployment Insurance Weekly Claims Report – Department of Labor