Looks like hurricane Sandy had a larger impact than most people are willing to admit. That huge surge in jobless claims (from a 4 week moving average of 365K to 409K) in November was certainly temporary as we’ve now come full circle. Today’s jobless claims data hit a post-recession low of 335K. That brought the 4 week average down to 359K.
Why is this good news?
First of all, jobless claims are one of the best real-time indicators of economic activity. We just don’t see recessions that aren’t accompanied by spikes in the claims data. It literally doesn’t happen.
Second of all, the claims data tends to correlate fairly well with the S&P 500. So, what’s good for the job’s market tends to be good for the stock market (more business hiring because they’re seeing better demand, etc).
Lastly, claims tend to be a good sign for the labor market. Non-farm payrolls and the inverted claims data have a very high correlation. At present, the trend is telling us that the growth in jobs is steady.
Things aren’t so bad after all.
(Claims vs payrolls via Orcam)
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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Unemployment Claims Improving? The seasonally adjusted initial unemployment claims reported today were the best reported since early 2008. However, if you look at the “real” numbers (i.e. the non-seasonally adjusted numbers compared to the same period in the prior year), they might be telling a different story. The improvement in weekly claims has been consistently declining since 2010. More recently, we’ve had a spike (see spike to 120,000 on graph) that can be explained by the “Sandy” tropical storm. However, the most recent spike has no explanation. Monitoring these changes in the coming weeks will be an important “tell” for claims going forward.
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shhhhh! “Seasonal Adjustment” is the BLS’, Fed’s & Government’s secret sauce, more prized and guarded more tightly than Colonel Sander’s batter recipe or the Coca-Cola formula.
I’m sorry, the last three Initial Claims numbers were each higher than the last…. “continue to nosedive”?
4 week average is down to 359 from recent high of 408….That’s a big change.
Sandy was a big hurricane.
4 wk average was…
363k 3/30/12
364k 8/10/12
365k 10/5/12
366k last week, and now 359k….. and of course we’ll see the usual revision up of this week’s number next week.
Only takes a normal revision and a 360k or better number next week to move the 4wk average over 360k again. 380k next week and it’s a 365k 4wk.
people can draw unemployment forever, not even 99 weeks anymore. why shouldn’t they be improving?
“Things aren’t so bad after all.”
I’ll agree with that when I’m no longer unemployed.
Cullen,
Have you tried to forecast the impact of the recent tax agreement on our economic growth?
Just wondering if the recent exuberance will lead to disappointment in the months ahead. From what I have read they estimate the total drag from taxes, and I include payroll taxes here, at around $170 billion. That seems like a rather large number. I keep thinking about that Kalecki equation when it comes to corporate profits and whether the multiplier on the tax increases is higher than 1.
Sentiment measures have swung wildly bullish as well and perhaps rightfully so but it seems there is no longer a “wall of worry” (a cliche I hate but it seems to have validity) especially when you look at the VIX. Lack of shorts, bears, high margin leverage, low cash positions, etc. Things appear downright giddy right now.
Have you changed your investment strategy in view of the current environment?
Thank you.
As long as the federal debt continues to outpace the growth of GDP, there is no sustainable recovery to speak of. Of course, the economy looks good in the short term, but I cannot believe it is self-sustaining yet. Besides, ‘official’ data on the economy seem to pain a much better picture that we see on the ground …
So, you’re saying the Ponzi can continue for so long as digital and paper fiat can be produced, as a way of masking the decreases in aggregate demand, production, and REAL productivity in the economy?
I soooo agree with that.
That’s what I am saying, yes indeed.
Who cares about the economy? Look at corporate profits!
Govt does not manage the economy but corporate profits. Ant they remain strong. Using the REAL economy as a factor in determining stock markets and risk assets direction is useless now. Embrace central planning of oligarchs’ well-being (and European EUDSSR)and BTFD (when it comes).
Things do seem to be clawing their way way forward, although the big question of whether private demand will return in time to inflate away some of the debt before the next recession has yet to be answered. It’s getting late in the cycle. How big of a problem would it be if we went back into recession in a year or two? Just imagine the political drama.
That is the crux of the problem. There has been hardly an instance in history where an economy has managed to simply ‘grow’ its way out of such a situation without some form of special circumstances and some form of financial repression (e.g. the US after WW II).
You have the financial repression now for several years running…
Since pc is turning into another shill for the fed and bls I guess I should remove them from my favorites like I did calculated risk(Bill the shill). Here are the unadjusted numbers. Gee, looks like they are much worse. What a suprise!
The advance number of actual initial claims under state programs, unadjusted, totaled 555,708 in the week ending January 12, an increase of 2,360 from the previous week. There were 525,422 initial claims in the comparable week in 2012.
http://market-ticker.org/akcs-www?blog=Market-Ticker&page=2
I know. This site would be 10x more popular if I lied to you all and told ranting conspiracy theories. But I vowed to provide accurate and unbiased data and analysis. If you want to listen to fearmongering fools who have been wrong about evrything for 5 years straight then be my guest. There’s a reason my macro views have been largely correct in recent years. It’s because I don’t engage in ideology and intentional deception.
Lee Adler has an entirely different – and more sophisticated – approach:
http://wallstreetexaminer.com/2013/01/17/apparently-boffo-jobless-claims-really-were-good-and-right-on-trend/
^
“Claims always peak in the first full week ended in January. This year, that was the most recent week, which ended on January 12. Last year it was the week ended January 7. Because “year-to-year” comparison is actually made versus 52 weeks ago, not exactly a year ago, that’s a problem this year. In its year to year comparison, the government compared the current week with the week ended January 14 last year. Claims always fall sharply in the second week of January, whereas they always rise sharply the first week. Therefore, comparing the current week with the January 14, 2012 week is not an “apples to apples” comparison. In this case, the “like” week would be the one ended January 7, 2012. Comparing the week ended January 12 this year to the one ended January 7 last year, we find a drop of 89,000 claims, or -13.7%. That’s smack dab on the trend this series has been on for the past couple of years. This is a good number, no better and no worse than usual in terms of the recent trend.”
Guys, I use a 4 week moving avg to eliminate the noise. All these conspiracies about how claims are worse than actually reported is nonsense.
Cullen, with genuine respect, can you provide a rebuttal to Lee Adler’s analysis of what he explicitly refers to as clearly manipulated 1st time jobless claims’ numbers, as published by the BLS, and then ran in every main stream financial media source headline, without any delving into the actual, raw, unadjusted numbers?
I remember when Barry Ritholtz essentially stated/wrote that those who were casting doubt on the integrity and accuracy of BLS seasonal adjusted data regarding jobless claims and employment data in general were engaging in some form of “conspiracy theory,” also, but he never provided a detailed case to demonstrate how and why BLS seasonal adjustments are NOT flawed methodologically, at best, and intentionally manipulated to falsely and positively skew the number reported, at worst.
Thank you.
Did you even read what Lee Adler said? He said the initial claims number was actually *better* than what the skeptics were saying.