Weekly claims for unemployment came in way below expectations, but that says nothing about the economy, since it is now clear that the unusual and unexpected rise in claims in recent weeks was an artifact of the seasonal adjustment process (it appears that April is a particularly hard month for the seasonals to get right—we saw a similar surge in April of last year that was subsequently reversed). Claims are back on track.
The first chart above shows unadjusted claims, while the second chart shows adjusted claims. In both cases the gradual downtrend in claims that we have seen for the past three years remains intact. (The purple line shows the 52-week average of claims to abstract from the seasonal adjustment process.) So the story with claims is that there is nothing new here: the labor market continues to gradually improve, and that means that the economy is likely also continuing to grow at a moderate pace. Most importantly, given the market's fear of an economic downturn (as reflected in the extremely low level of Treasury yields), there is no sign here whatsoever of any deterioration.
According to my calculation, withholding tax receipts for the period covering the April jobs report has been either +5.85% or +6.6% over the comparable weeks last year, depending on exactly which weeks you include. Compromise and you get +6.23%.
ReplyDeleteThis is easily the best y-o-y comparison of the past 3 months (didn't do this for January). February's number was +2.6% and March's number was +2.2%.
For the full month of April, average daily withholding tax receipts were about 7% over April of last year.
6.23% is a very good number. Either:
1. Job gains in previous months have been understated, or
2) We're going to get a monster jobs report tomorrow, or
3) Wage growth and hours worked over the past year have been much better than reported to date, or
4) Some combination of the above.
Additionally, my own little algorithm for calculating monthly jobs growth using auto sales suggests March will be revised upward to at least 150K, and this month should be close to 200K.
The only thing keeping me from saying, as I did for January's jobs report, that "nobody is expecting this," is the uptick in jobless claims we had the past month. So I'll at least say, "Don't be surprised at an upside surprise."