Weekly Unemployment Claims At 350K - Lowest 4-Week Moving Average Since March 2008

by: Doug Short

The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 350,000 new claims number was a 12,000 decline from a 1,000 upward adjustment of the previous week. The less volatile and closely watched four-week moving average, which is usually a better indicator of the recent trend, fell to 356,750. That is the lowest four-week MA since March of 2008. Here is the official statement from the Department of Labor:

In the week ending December 22, the advance figure for seasonally adjusted initial claims was 350,000, a decrease of 12,000 from the previous week's revised figure of 362,000. The 4-week moving average was 356,750, a decrease of 11,250 from the previous week's revised average of 368,000.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 15, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 15 was 3,206,000, a decrease of 32,000 from the preceding week's revised level of 3,238,000. The 4-week moving average was 3,219,000, a decrease of 24,750 from the preceding week's revised average of 3,243,750.

Today's seasonally adjusted number was significantly below the Briefing.com consensus estimate of 375K.

Here is a close look at the data over the past few years (with a callout for 2012), which gives a clearer sense of the overall trend in relation to the last recession and the trend in recent weeks. In the callout, note the spike in red dots associated with Sandy. The most recent dot puts us back at pre-Sandy levels.

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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.

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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 four-year calendar years 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.

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