Weekly claims are unexpectedly up again, with the 4-week moving average holding near or above 450,000 for months.
Once again the number of claims exceeded the estimate of every economist in the survey, this time by a minimum of 23,000 claims. The last two times economists blamed snow and Easter (as if they did not know there was snow or Easter) when they made their projections.
This week there is no Easter or weather to blame. I guess it’s just one of those things (like economists being perpetually optimistic).
Weekly Claims Report
Please consider the Unemployment Weekly Claims Report for April 20, 2010.
In the week ending May 15, the advance figure for seasonally adjusted initial claims was 471,000, an increase of 25,000 from the previous week’s revised figure of 446,000. The 4-week moving average was 453,500, an increase of 3,000 from the previous week’s unrevised average of 450,500.
The weekly claims numbers are volatile so it’s best to focus on the trend in the 4-week moving average.
4-Week Moving Average of Initial Claims
The 4-week moving average is still near the peak results of the last two recessions. It’s important to note those are raw numbers, not population adjusted. Nonetheless, the numbers do indicate broad weakness.
4-Week Moving Average of Initial Claims Since 2007
To be consistent with an economy adding jobs coming out of a recession, the number of claims needs to fall to the 400,000 level.
At some point employers will be as lean as they can get (and still stay in business). Yet, that does not mean businesses are about to go on a big hiring boom. Indeed, unless consumer spending picks up, they won’t.
Since December of 2009 the 4-week moving average of weekly claims has bounced around between 440,00 and 480,000 spending most of the time near 450,000. Progress has hugely decelerated, at best.
Questions on the Weekly Claims vs. the Unemployment Rate
A question keeps popping up in emails: “How can we lose 400,000+ jobs a week and yet have the unemployment rate stay flat and the monthly jobs report show gains?”
The answer is the economy is very dynamic. People change jobs all the time. Note that from 1975 forward, the number of claims was generally above 300,000 a week, yet some months the economy added well over 250,000 jobs.
Also note that the monthly published unemployment rate is from a household survey, not a survey of payroll data from businesses. That is why the monthly “establishment survey” (a sampling of actual payroll data) is not always in alignment with changes in the unemployment rate. At economic turns the discrepancy can be wide.
Barring short term census effects, it may be quite some time before we weekly claims drop to 300,000 or net hiring exceeds +250,000.
Mike “Mish” Shedlock
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