Thursday, February 4, 2010

One hiccup in claims doesn't mean anything

The market today is distressed over the unexpected rise in unemployment claims, among other things. But nothing ever moves in a straight line, as this chart should attest. What's happening today has happened before, without serious consequences. Consider the first half of 1992, when claims were averaging about 420K per week, and then briefly jumped to almost 450K. That didn't stop the economy from growing at an annualized 4.3% throughout the first half of 1992. In fact, if you adjust claims for the size of the workforce (which is 21% larger today than it was then), today's level of claims is about 5% lower than than the average level of claims in the first half of 1992. This is a tempest in a teapot, as they used to say.


alstry said...


Do you really think the market is spooked by the first time unemployment claims? We have had about half a million people or more applying for unemployment for for the first time each week for well over a year.....I guess the difference now is practically no one is hiring where as tradtionally about 250K jobs were being created per week.

Do you think an issue might be that much of the world is going broke like Dubai, Greece, Spain, Portugal, Latvia, Iceland, Ireland just to mane a few?

Doesn't one go broke when they exhaust savings spending on consumption to drive growth? What happens if the world goes broke all at about the same time?

Do you think that could be a reason why tensions are spreading around the world?

Do you have any thoughts on what impact would a military conflict might have on growth?

Thanks again.

brodero said...

the 52 week moving average of nonseasonally adjusted jobless claims peaked in November at 577,109. This average today is 553,980. This metric has a .91 correlation with the unemployment rate. So the direction is positive.
One item of note is with this metric all major states are moving
favorably except for one. Unfortunately that state is California. This moving average
has stalled. California makes up 10
to 15% of national jobless claims.
This month it was 13.4% when most
Januaries (on an NSA basis)for California were 11%.