Weekly Unemployment Claims: 4-Week Moving Average At A 5 Year Low

by: Doug Short

The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 340,000 new claims number was a 7,000 decrease from the previous week's 347,000, an upward adjustment from the previously reported 344,000. The less volatile and closely watched four-week moving average, which is usually a better indicator of the recent trend, declined by 7,000 to 348,750 -- the first number below 350K since early March 2008, a five-year low. Here is the official statement from the Department of Labor:

In the week ending March 2, the advance figure for seasonally adjusted initial claims was 340,000, a decrease of 7,000 from the previous week's revised figure of 347,000. The 4-week moving average was 348,750, a decrease of 7,000 from the previous week's revised average of 355,750.

The advance seasonally adjusted insured unemployment rate was 2.4 percent for the week ending February 23, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending February 23 was 3,094,000, an increase of 3,000 from the preceding week's revised level of 3,091,000. The 4-week moving average was 3,121,750, a decrease of 37,500 from the preceding week's revised average of 3,159,250.

Today's seasonally adjusted number was below the Briefing.com consensus estimate of 350K.

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.

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