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Initial Jobless Claims- Just a Disturbance In the Force or Change of Trend?

Weekly initial jobless claims actually were down by approximately 16,000. That’s the actual not seasonally fudged number taking into account the fact that these are actual counts that are always revised up when complete data is in. I ignore the seasonally adjusted fictitious number, and have included an adjustment of +7,000 to the number reported in the government release  to account for the normal upward revision in the final data. The adjustement is based on the average of the last 2 weekly revisions. For more on this, and why I only use actual, rather than seasonally smoothed fictitious numbers see this report.  If you want to know the seasonally adjusted numbers, that nonsense is readily available from Hizzoner Bloomberg’s and Hacker Murdoch’s tout sheets.

This week’s number is much smaller than the decline for the same week in the past 2 years, and the average decline for this week in the past 10 years. In 2011, the drop in the same week of April was 66,195, and in 2010 when the economy was initially rebounding from the worst period of the depression, it was down by 76,470. The average decline this week for the 10 years from 2002 to 2011 was 30,786. That included both “normal” and  recession periods, as well as bubble periods.  The last time the weekly decline was this small at this point in April was in the week of April 11, 2009 at the nadir of the depression, when the drop was only 13,108.

These numbers are extremely volatile week to week. On balance, early April is a period where claims always increase. On the basis of the past 2 weeks,  claims are up by 55,205 (including the upward adjustment for this week’s incomplete data.) This year does not fare well on that score either. It compares with last year’s increase of 28,017, and 2010’s 17,161. The average 2 week  increase for this part of April for the past 10 years was 21,847. On the basis of short term performance this looks like an indication of economic weakening.

Initial Unemployment Claims Chart- Click to enlarge
Initial Unemployment Claims Chart- Click to enlarge

On the basis of the year to year change, this week’s initial claims were down by 1.9%. That is a real slowing in the rate of improvement in the trend, which had consistently been running at declines of 3% to 15% since 2010.  However, there was a similar spike in the trend of improvement last April. It’s too early to tell if this represents a change of trend or just a temporary disturbance in the force. It will take 3 or 4 more weeks before this will be clear.

If you flip the claims trend over and plot it on an inverse scale alongside the S&P 500, it’s clear that the week to week correlation is non existent, but in terms of the broad trend, claims seem to follow the direction of the stock market. That’s no accident because both follow the direction of the Fed’s expansion of its balance sheet or lack thereof.

Initial Claims and Stock Prices Chart - Click to enlarge
Initial Claims and Stock Prices Chart - Click to enlarge

When the line connecting the same week each year turns down, that could indicate that the time has finally come for a major decline in stocks.

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