Jobless claims for the week ended February 7th came in at 623,000, pushing the 4-week average above 600,000 for the first time since 1982. This is a clear indication that the U.S. jobs picture remains weak. Further evidence of this weakness comes from continuing claims where 4.8 million are still on the unemployment roles.
If you look at the chart above supplied by the U.S. Department of Labor you should note the four areas highlighted in red showing last weeks numbers and the year ago numbers. What I want to highlight there is that the last row is misleading. This 4-week average of the seasonally-adjusted number is abnormally low compared to an equivalent average for the number in the middle row, the unadjusted number.
For example, if you compare the 4-week average on a seasonally adjusted basis to where things were tracking last year, you see an increase of 262,000 and 2 million for initial jobless claims and continuing claims respectively. If you look at those same comparisons on a unadjusted basis — numbers not on the chart – the numbers jump to 306,000 and 2.48 million. I read this to mean — especially regarding continuing claims — that seasonal adjustments are skewing the data lower in a way that understates the severity of the employment downturn. This skew has diminished for initial claims but continues unabated for continuing claims, suggesting unemployment will rise much more than is anticipated — beyond 10%.
To the degree that this unemployment feeds into a decrease in consumer spending, this means there is considerable downside risk to spending growth, the latest retail sales data notwithstanding. Translation: higher unemployment means lower spending which means lower growth. Watch the retail sales numbers in the next two months to see how this plays out.
Source
Unemployment Insurance Weekly Claims Report – U.S. Department of Labor