The headline number for initial jobless claims came in at 339,000, which was close to Wall Street economists’ consensus guess of 335,000. On the surface it looked like a non event, with the stock market seemingly viewing it as such, but the actual data shows a more troubling picture.
The headline number is a seasonally adjusted, fictional number. The Department of Labor also reports the actual number of filings which the 50 states count and send to it weekly, absent a few interstate claims which show up in the following weekly revision of the advance figure released each week for the week before. Those upward revisions are usually in the 1,000 to 4,000 range, which isn’t material in the big picture, but in this case it will make a bad number even worse, perhaps turning the year to year trend negative.
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Downward Trend in Initial Unemployment Claims Comes To Near Halt
The DOL reported that “The advance number of actual initial claims under state programs, unadjusted, totaled 358,914 in the week ending February 8, an increase of 3,727 from the previous week. There were 361,417 initial claims in the comparable week in 2013.”
The current number was down 2,500 or 0.7% year over year. This was a sharp deceleration from the prior week’s annual rate of decline of 8.6%, and it’s near the top of the range of weekly annual percentage changes of the past 15 months. Furthermore, the week to week increase of 3,727 was atypical for this week of February. Last year that week had a drop of 27,000. The average change for this week over the previous 10 years was a drop of 6,600. Instead of dropping this week, as is the norm, claims rose. By any measure this was not a good performance.
Stock prices and initial unemployment claims have historically had a strong inverse correlation. A negative divergence developed in the final burst of the last bubble in 2007, with the trend of claims stalling from 2006 through 2007 while stock prices entered their final blowoff. No such divergence has developed yet in the current market, but it could show up with a couple more weeks of weak performance versus last year. Even on a log scale chart it seems clear that stocks have “bubbled off” over the past 15 months. If the improvement in initial jobless claims stops, consider it a warning that we are in the endgame of this bubble.
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