The impressive decline in unemployment claims that began last April has been derailed. This may be a sign that the economy is turning south, but it may also be just one of those things that happen on the road to recovery. I note that similar setbacks occurred several times (and more severely) in the early years of the recoveries following the '90-91 recession and the '01 recession. The recent jump in claims may also be due to weather, and it seems likely that snowstorms in the East will contribute to a disappointing jobs number next week. I think you have to expect data to be volatile from time to time. It's much more likely that we are just seeing random noise here than that there is a fundamental change in the economy's direction afoot.
UPDATE: As an alert reader reminds me, non-seasonally adjusted claims have actually plunged from 800,000 during the week of Jan. 8th, to 452,000 in the most recent week. That the seasonally adjusted number has risen over this same period means that claims haven't fallen as much this year as they might normally be expected to. But it's possible, especially given the gyrations of the past few years, that the seasonal adjustment factors are off. This is a good reminder that you should always take statistics like this that are subject to seasonal adjustment with a grain of salt.
Scott,
ReplyDeleteCould this be evidence of the feared doubl-dip recession? I've seen some statements by billionaries like Carl Ichan that there is going to be a "bloodbath" in the market when this happens. I have heard from other sources that the really rich investors are still holding cash because they don't think the recovery will hold.
The 52 week moving average of nonseasonally adjusted jobless claims ( which has a .91 correlation with changes in the unemployment rate) continues to decline. It is now at 542,355. The high was on October 31st at 576,928.This average is now 6% off its high. Curiously this average peaked in 1982-1983 recession on 1/15/83 at 578,594. 16 weeks later
ReplyDelete( same amount of time in this recession) this average was at555,501 only 4% off its high.
I don't see any evidence of a double dip recession. I do see lots of evidence that people are still unusually risk-averse, however. That's why cash yields zero these days—everyone is desperate for safety, despite the huge amount of debt being sold by the U.S. Treasury. There is plenty of skepticism about the recovery. That's why, as a contrarian, I remain optimistic. To seek the safety of cash that pays zero, you have to be really really sure that things are going to turn south. In contrast, I think the economy can at the very least avoid a double dip and manage to grow.
ReplyDeletebrodero: interesting observation, thanks. I should add that while SA claims are rising, NSA claims are falling rather sharply. The reality is sometimes very different from what the numbers say.
ReplyDeleteAs a side note...I also track the states' 52 week moving avergage of non seasonally adjusted jobless claims. All major states are showing improvement...New York,Ohio,Pennsylvania Illinois,
ReplyDeleteMichigan,Texas,North Carolina,Florida ( finally) except one. And it is a major one. California hit its high on December 13th at 75,124.Today's numbers have California at 74,878 ,only .3% off its high.
Another way of looking at it....
ReplyDeleteNational jobless claims less Califonia jobless claims on a 52 week moving average basis is now
7.3% off its high....