Weekly Unemployment Claims Again Drop Dramatically

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The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 330,000 new claims number was a 5,000 decrease from the previous week. That is the lowest number of initial claims since January of 2008. The less volatile and closely watched four-week moving average, which is usually a better indicator of the recent trend, fell from 359,250 to 351,750, the best reading since March of 2008. The first three weeks of 2013 show the sharpest decline in claims for the comparable opening weeks for the previous three years. Here is the official statement from the Department of Labor:

In the week ending January 19, the advance figure for seasonally adjusted initial claims was 330,000, a decrease of 5,000 from the previous week's unrevised figure of 335,000. The 4-week moving average was 351,750, a decrease of 8,250 from the previous week's revised average of 360,000.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending January 12, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending January 12 was 3,157,000, a decrease of 71,000 from the preceding week's revised level of 3,228,000. The 4-week moving average was 3,197,500, a decrease of 12,250 from the preceding week's revised average of 3,209,750.

Today's seasonally adjusted number was way below the Briefing.com consensus estimate of 355K, and Briefing.com's own estimate was for 365K.

The unemployment report footnotes for the previous week's unadjusted data identifies 12 states with a decrease of more than 1,000 layoffs (New York at the top, where claims fell by 27,487) and 14 states with an increase of more than 1,000 new claims (Texas topping that list with 12,786 new claims).

Here is a close look at the data over the past few years (with a callout for the several months), which gives a clearer sense of the overall trend in relation to the last recession and the trend in recent weeks.

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As we can see, there's a good bit of volatility in this indicator, which is why the 4-week moving average (the highlighted number) is a more useful number than the weekly data. Here is the complete data series.

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Occasionally I see articles critical of seasonal adjustment, especially when the non-adjusted number better suits the author's bias. But a comparison of these two charts clearly shows extreme volatility of the non-adjusted data, and the 4-week MA gives an indication of the recurring pattern of seasonal change in the second chart (note, for example, those regular January spikes).

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Because of the extreme volatility of the non-adjusted weekly data, a 52-week moving average gives a better sense of the long-term trends. I've now added a linear regression through the data. We can see that this metric continues to fall below the long-term trend stretching back to 1968.

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A Four Year Comparison

Here is an overlay of the past three calendar years and the beginning of 2013 using the 4-week moving average. The purpose is to show the relative slope of improvement since the peak in the spring of 2009. Here, too, we see a clear illustration of the Superstorm rise and fall in the moving average, and the first three weeks of this year show the sharpest beginning-of-year decline during the illustrated timeframe.

weekly overlay

For a broader view of unemployment, see the latest update in my monthly series Unemployment and the Market Since 1948.

Source: Advisor Perspectives

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