Weekly Unemployment Claims Fall Well Below Forecasts

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The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 341,000 new claims number was a 27,000 decline from the previous week's 368,000, an upward adjustment to the previously reported 366,000. The less volatile and closely watched four-week moving average, which is usually a better indicator of the recent trend, rose 1,500 to 352,500. Here is the official statement from the Department of Labor:

In the week ending February 9, the advance figure for seasonally adjusted initial claims was 341,000, a decrease of 27,000 from the previous week's revised figure of 368,000. The 4-week moving average was 352,500, an increase of 1,500 from the previous week's revised average of 351,000.

The advance seasonally adjusted insured unemployment rate was 2.4 percent for the week ending February 2, a decrease of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending February 2 was 3,114,000, a decrease of 130,000 from the preceding week's unrevised level of 3,244,000. The 4-week moving average was 3,187,250, a decrease of 28,750 from the preceding week's revised average of 3,216,000.

Today's seasonally adjusted number was substantially below the Briefing.com consensus estimate of 365K.

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. The early weeks of this year show the sharpest beginning-of-year decline during the illustrated timeframe.

weekly claims yearly

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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