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Initial Unemployment Claims Belie Last Week’s Hysteria on Jobs

This report is an excerpt of the currently updated permanent Employment Charts page which includes the monthly jobs and average earnings data, as well as the Labor Departments Job Openings and Labor Turnover Survey (JOLTS) and real time data on Federal Withholding taxes. The charts on that page are updated as soon as new data becomes available. Bookmark that page for permanent reference. 

Initial Claims

Updated June 7, 2012

This week’s data on first time unemployment claims ran clearly counter to the recent headline hysteria about jobs.

In the week ended June 2 actual claims (not seasonally finagled) were 325,900 including  the addition of 4,000 claims to adjust for incomplete state counts at the time of  the advance release (current week). The week was stronger than the week ended June 4, 2011 when new claims totaled 366,800.  40,000 fewer people filed first time claims this year than in the same week in 2011.  It was also stronger than the 10 year average claims for this week of 365,400. Claims decreased by 20,400 in the current week this year versus 14,700 for this week in 2011 and a 10 year average decrease  of 19,500.

There’s a lot of week to week volatility in the data. Looking at a two week span, claims decreased by 4,500 versus a decrease of 9,400  in the same 2 weeks in 2011. However, the 10 year average for this 2 week period showed an increase of 18,300. Overall, this week’s data is consistent with the recent trend. On the chart, the slope of the year to year line for this week has been remarkably stable since 2010. The annual rate of decrease in new claims continues to oscillate around the -10% axis. The latest data was down by 11.2% versus 9.5% last week.

This data suggests that the Fed has little rationale to do additional QE, but that it will need to continue the MBS purchase program to keep its balance sheet from shrinking (covered in the Professional Edition Fed Report).

Initial Unemployment Claims - Click to enlarge

Initial Unemployment Claims - Click to enlarge

 

Plotted on an inverse scale, the correlation of the trend of claims with stock prices is strong. Both are driven by the Fed’s operations with Primary Dealers as covered weekly in the Professional Edition Fed Report. See also The Conomy Game, a free report. Last week I wrote that the fact that the claims trend was intact suggested that the intermediate downtrend in stock prices should end somewhere between 1160 and 1200 unless there was a significant change in the claims trend over the next 4-8 weeks.  That observation may have already come to fruition.  The Professional Edition Daily Market Updates cover my take on the technical side of the market for those who follow the charts in that regard.

Initial Unemployment Claims and Stock Prices - Click to enlarge

Initial Unemployment Claims and Stock Prices- Click to enlarge

 

As the number of workers eligible for unemployment compensation has trended upward slightly since 2009, the percentage of workers filing first time claims has continued to decline. Comparing the current week yearly line to the 52 week moving average, the trend appears remarkably stable.

Initial Unemployment Claims Percentage of Total Employed - Click to enlarge

Initial Unemployment Claims Percentage of Total Employed - Click to enlarge

 

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