The four-week moving average of weekly unemployment claims has risen slightly over the past month and is now hovering around the 460,000 level. Lower levels were seen in December of 2009.
Weekly Claims Report
Please consider the Unemployment Weekly Claims Report for June 24, 2010.
In the week ending June 19, the advance figure for seasonally adjusted initial claims was 457,000, a decrease of 19,000 from the previous week’s revised figure of 476,000. The 4-week moving average was 462,750, a decrease of 1,500 from the previous week’s revised average of 464,250.
Once again, and for weeks on end, the previous week was revised up, this time from 472,000 to 476,000. Thus the reported decrease is exaggerated in comparison to last week’s reported numbers at the time.
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. Stalled is a better word as the following chart shows.
4-Week Moving Average of Initial Claims Since October 2010
Since mid-December 2009 improvements in weekly claim numbers has essentially stalled. Since March, the 4-week moving average has been trending slightly up.
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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