Weekly Unemployment Claims Fall, But Less Than Forecast

by: Doug Short

The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 366,000 new claims number was a 5,000 decline from the previous week's 371,000, an upward adjustment to the previously reported 368,000. The less volatile and closely watched four-week moving average, which is usually a better indicator of the recent trend, declined from an upwardly adjusted 352,750 to 350,500. Here is the official statement from the Department of Labor:

In the week ending Feb. 2, the advance figure for seasonally adjusted initial claims was 366,000, a decrease of 5,000 from the previous week's revised figure of 371,000. The four-week moving average was 350,500, a decrease of 2,250 from the previous week's revised average of 352,750.

The advance seasonally adjusted insured unemployment rate was 2.5% for the week ending Jan. 26, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending Jan. 26 was 3,224,000, an increase of 8,000 from the preceding week's revised level of 3,216,000. The four-week moving average was 3,211,000, an increase of 13,750 from the preceding week's revised average of 3,197,250.

Today's seasonally adjusted number was above the Briefing.com consensus estimate of 360,000, but Briefing.com's own estimate was closer to the mark with their 365,000 forecast. 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 four-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 four-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 four-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 time frame.

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