Weekly unemployment claims fell 31,000 from the last week’s revised total of 504,000 (revised up by 4,000). For a welcome change, an economic number actually came in better than economist projections.

However, 473,000 claims can hardly be considered encouraging. It is solidly in territory that suggests the economy is shedding jobs.

Weekly Claims Report

Please consider the Weekly Unemployment Claims Report

In the week ending Aug. 21, the advance figure for seasonally adjusted initial claims was 473,000, a decrease of 31,000 from the previous week’s revised figure of 504,000. The 4-week moving average was 486,750, an increase of 3,250 from the previous week’s revised average of 483,500.

Unemployment Claims

The weekly claims numbers are volatile so it’s best to focus on the trend in the 4-week moving average, that number went up. It will go up if the current number is higher than the number form 5 weeks ago, and down if the current number is lower than the number 5 weeks ago.

The trend has been up for a while. Three weeks from now, the 4-week moving average will decline as long as the number is lower that last week’s print of 504,000.

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, persistent weakness.

4-Week Moving Average of Initial Claims Since 2007

No Lasting Improvement for 9 Months

There has been no lasting improvement since November 2009, over nine months ago.

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.

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.

With census effects nearly played out, It may be quite some time before weekly claims drop to 400,000 or net hiring that exceeds +250,000.

Mike “Mish” Shedlock
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