Unemployment's Surprisingly Large Drop

Did you catch that? Yesterday while we were all making our predictions for 2009, we had our first significant indicator of what results to expect because of the swift policy actions of our Federal Reserve leaders.

New claims for unemployment benefits made a surprisingly large drop last week: the largest drop in 16 years.

The Labor Department reported that initial claims for jobless benefits fell by 94,000 to a seasonally adjusted 492,000 in the week ended Dec. 27. The claims were down from the unrevised level of 586,000 the week before.

The drop surprised almost all economists surveyed by Dow Jones. In fact the drop was almost 9 times greater than the consenses estimates. And I must admit such a significant drop surprised even me.

It's time again to remember that when it come to macro economic condition analysis, "the majority is always wrong."

Comments

[BBrown:]

Of course the numbers dropped, it would coincide with people running out of unemployment benefits. How gullible will the public remain in receiving reports like this, saying things are getting better. Where are the 94,000 jobs at? Stores closing, construction jobs laying off, auto industry cut backs, where are the jobs........... Must be yard work jobs at the top CEO's houses huh? I'm sure those over paid @#*%@# have ripped off enough from investors and wage earners to pay many years wages to the laid off 94,000 they got it from to start with. And while we're at it, you better know all of the workings of your bank or you may not have a bank in the very near future. The number of mergers, cut backs and lay offs, and the number of bank closings, is rising. Time to pull your heads out of the sand folks.

Jan 01 09:34 AM

[Rob Viglione:]

Does this statistic normalize for holiday hires? If so, this is great news!

Jan 01 10:20 AM

[sunnsea:]

You're kidding, right? During the week of Dec. 22 to Dec. 27 you had a national holiday known as Christmas and a Jewish holiday known as Chunnakah. Most places closed at noon or one p.m. on the 24th and remained closed over the 26th, Friday, yes, even government agencies. This whole story, repeated over and over on CNBC yesterday is totally irresponsbile if not idiotic. Most unemployed persons either filed before that week or just will wait until after Jan. 2 to deal with the bureaucracies. Happy New Year.

Jan 01 10:54 AM

[secmaven:]

Many employers such as retailers had mercy on their workers and did not dump them just before Christmas. The key to this metric is what happens in the first weeks of January.

Jan 01 11:22 AM

[Urbane Gori...:]

Yep! Unemployment is headed down! People are back at work! Excess home inventory is evaporating! House prices are heading back up! A gallon of milk has dropped to $1.00! All the businesses that are closing have decided to reopen! GM really does make a magnificent piece of iron and those cars should be heading out the door in droves (pardon the pun!) The economy is great! Dubya can speak in complete intelligible sentences! And the market is heading back to 14,000!!!

Meanwhile, I'll continue daytrading..... jegan ;-)

Jan 01 11:24 AM

[johngaltfla:]

You have got to be kidding me, right? The numbers were essentially for two days worth of data, Monday and Tuesday the 22nd and 23rd. December the 24th is notoriously a light day for applications for unemployment benefits as it is a holiday and travel day for most Americans. The 25th, FYI, is a holiday and on the 26th that is considered a trap day as very few people apply for benefits the day after Christmas. When the numbers come out in the first two weeks of January 2009, then and only then will you start to see the true picture of what is happening. Data and market activity the last two weeks of the year is suspect at best, irrelevant to anyone with more than two functioning brain cells. I'm amazed that the MSM and OP are still grasping at desperate straws to promote a reason to fulfill their bullish case. This is the kind of dishonest insanity that created the problem in the first place. Manipulating the headlines never changes the end results. If you don't believe me, ask Charlie Gasparino about the numerous takeovers of Bear Stearns he reported in February of 2008.

Jan 01 11:41 AM

[long_on_oil:]

Sooner or later the injection of all this liquidity is going to pay off and no one knows when. When times are good we can not remember the bad. When times are bad we have a tendency to think they will never be good again and on and on it goes.
Whenever the local fast food restaurant leaves a sign in the window advertising for help at $9 an hour and gets very few takers what does that tell us? At what wage are the unemployed willing to work? The government is the problem not the solution. Whenever we pay people more to stay unemployed than to work this downward spiral will continue.

Jan 01 11:47 AM

[johngaltfla:]

This posting is a perfect illustration of the dishonesty the permabulls have been promoting for over two years now and the nonsense that has been propagated by not just the financial industry itself, but the MSM and our government agencies. When one uses data to illustrate a viable point it helps to have some realism for the basis but the original post fails to point out that the data presented was effectively for two business days. The two days of filings basically were for 12/22 and 12/23. Very little activity is undertaken by the civilian workforce on 12/24 and 12/26 and much to the shock of the cheerleaders trying to convince the sheeple to "stay long" or "buy and hold" all government offices are closed on 12/25. The 24th and 26th are usually travel days and even the newly unemployed use that time to spend it with family as they know they can file after the first of the year and still receive benefits due to them.

This quote:

"It's time again to remember that when it come to macro economic condition analysis, "the majority is always wrong."

highlights the insanity that has passed for economics, financial advice and "reporting" in our society today. The truth is that majority is not always wrong, usually in our new society it's the data that is suspect. In the case of the original poster it is an illustration of the foolishness we have seen exhibited by the financial community to promote false hope. The first two full weeks of January 2009 will hammer the case home that the unemployment situation is not moderating and that once again the "good news" is the usual lipstick on a pig approach to presenting information to a gullible public.

The original posting is a dishonest disservice to the blogging world which focuses on current events and economics. If you think that presenting "good news" without highlighting the facts behind the data is such a great idea, ask Charlie Gasparino how it worked out for Bear Stearns. He should know. During February of 2008 he reported a takeover rumor for the firm several times during the month precisely between 2:15 p.m. and 2:45 p.m. on major down days for the S&P helping to "save the day" as it was called. In the end, the markets functioned somewhat efficiently by marking down falsely valued corporations to zero or to levels reflecting their true new worth, despite the government's best efforts to mask the problem.

Keep on playing the role of cheerleader and the rest of us will short the dog snot out of your "good news" and profit accordingly.

Jan 01 11:52 AM

[phantomfive...:]

"...we had our first significant indicator of what results to expect because of the swift policy actions of our Federal Reserve leaders."

Is this guy for real?

Jan 01 12:25 PM

[jepittman:]

Yes, he is. It remains to be seen if the unemployment claims number is an abberation or not but it is likely that the economic news could at least stop getting worse sometime soon. The author's quote 'in economics the majority is always wrong' is from John Kenneth Gailbraith, a prominent economist with a long, colorful career. As we move into 2009 the majority is gloomy and pessimistic, and posters on SA are no exception.


On Jan 01 12:25 PM phantomfivefive wrote:

> "...we had our first significant indicator of what results to expect
> because of the swift policy actions of our Federal Reserve leaders."
>
>
> Is this guy for real?

Jan 01 01:50 PM

[Trinitymaster:]

We will see 8% unemployment by mid-January. True unemployment/underempl... is around 30%. Did anyone notice that most of the Mexicans are going home?

When hard-working people, who are willing to break their backs for less than minimum wage, can't find jobs- then you know how truly screwed we really are

The numbers (once again) are being manipulated by those who are totally embarassed by their handling of our fragile economy.

Jan 01 02:18 PM

[Andrew Hor...:]

Excuse me, but... ECONOMISTS understand that shortened weeks provide unusable information.. Good try though...

A

Jan 01 02:38 PM

[primemeridian:]

let's wait to see the revision

Jan 01 07:42 PM

[mrbill:]

On Jan 01 01:50 PM jepittman wrote:

> The author's quote 'in economics the majority is always wrong' is from
> John Kenneth Gailbraith, a prominent economist with a long, colorful
> career. As we move into 2009 the majority is gloomy and pessimistic,
> and posters on SA are no exception.

Maybe they're wrong in not being pessimistic enough.

Jan 01 09:01 PM

[Steven Hansen:]

this data was compiled during the days between christmas and new years by government employees. wait until next week to see how much the data was adjusted.

Jan 02 03:34 AM