This week, yet again, the Wall Street spinsters were making hay while the sun shines.
The Marketwatch headline reads “Initial jobless claims lowest since January.”[i] Bloomberg reported that “U.S. Initial Jobless Claims Decreased Last Week”.[ii] CNBC ran the headline “New Jobless Claims Plunge; Continuing Claims Hit Record”[iii].
Other cheerleading sections ran similar headlines. The media seems to be going out of its way in an attempt to reinforce the perception that things are getting better, the economy is “healing”, and green shoots are popping out all over the place. Never mind whether or not it is true. Truth doesn't count for much these days.
the week ending July 4, the advance figure for seasonally adjusted initial claims was 565,000, a decrease of 52,000 from the previous week's revised figure of 617,000. [iv]
However, Wall Street's cheerleaders immediately leapt on this as more “proof” of the green shoots theory. The truth is found with a deeper look. If we look at the numbers without “seasonal adjustment” (NSA), we find that unemployment claims DID NOT fall, but, actually, rose by 17,612 from the prior week.
But, let's forget about the gimmicks in government statistics, for a moment, and assume that seasonal adjustment is needed. The critical fact is that that the number of non-adjusted new claims for unemployment insurance benefits rose by 175,834 claims year over year. In other words, back in the week of July 4, 2008, new claims were only 401,672. With the government's adjustment for the season, the increase
in new claims year over year is actually 198,000. So, seasonally adjusted or non-seasonally adjusted, we have a catastrophic rise in the number of new claims for unemployment on our hands.
But, let’s look even deeper. Unfortunately, it is not particularly unusual for the number of new unemployment insurance claims to temporarily decrease in early July over late June. For example, in the week ending July 5, 2008, a year earlier, the advance figure for seasonally adjusted initial claims was 346,000, a decrease of 58,000.[v]
Perhaps, people wait out Independence Day week before making their unemployment claim, or, perhaps, employers wait until afterwards to announce layoffs. Even in the week ending July 1, 2006, before the advent of the acute stage of the financial crisis, and in the midst of the housing boom, the advance figure for seasonally adjusted initial claims was 313,000, a decrease of 2,000 from the previous week's revised figure of 315,000.
Thursday’s unemployment numbers are NOT good news, except to those in the media who want to paint a misleading picture of things, and those investors who are grasping at straws. The BLS numbers simply provide additional evidence, all of which points to a continuing steep decline of the American economy, with more brown weeds poking their ugly heads out of the ground, and no green shoots at all.
Disclosure: No positions in any company named in the article.