Thursday, June 16, 2011

Claims: much ado about nothing (cont.)

The April bulge in weekly unemployment claims, which kicked off the latest round of concerns that the U.S. economy is entering a double-dip recession, continues to fade away.

The top chart shows the seasonally adjusted (reported) number, while the bottom chart shows the unadjusted number. The raw data show that claims have been flat since mid-February, while the adjusted data show a big rise starting in April. The difference between those two numbers is the seasonal adjustment factor. That factor expected to see a decline in actual claims beginning in April, and instead claims turned out to be flat. So the adjusted number was bumped up. Claims were flat instead of declining because auto plants accelerated their layoffs, which would normally have occurred in July, because of the supply disruptions which cascaded through the global manufacturing system in the wake of the Japanese tsunami.

We are now beginning to see the payback for this whole charade. Actual claims rose a bit last week, but the reported number declined, which means that the seasonal factors expected to see an even bigger rise in actual claims. If the expected auto layoffs do not occur next month (because they have already happened), then the seasonal factors will produce a very large decline in reported claims. And the press will announce that the economy once again avoided a double-dip recession. When in fact nothing at all happened out of the ordinary.


Bill said...


I don't understand how all of the softness in the regional manufacturing surveys can be attributed to Japan. Aren't these surveys telling us that manufacturing as a whole is in a soft patch? These declines seem much steeper than one would expect from a decline in auto manufacturing.

brodero said...

Bingo!! Scott