It was another day of positive data in which people have tried to find bad news. How many of you do this when you open your Christmas presents? Do you look at the thing and try to figure why it isn’t as good a present as is seems?
Thursday’s jobless claims data are unequivocally goods news even we cannot evaluate them fully. Claims shot up by 27K the week before and now they have plunged by 50K. This is huge volatility even by the standards of jobless claims. Last week we pondered if all the progress was slipping though our fingers; this week it looks like progress has re-accelerated. Well, maybe not, but at least we know that last week’s signal was false and now, once again, we wait for next week’s report to give us a clue where claims are going to settle in.
The 350K mark is quite good and is as close to normal as we have seen for some time. Claims rarely get down below the 300K level for example.
Since 1974 the median value for claims has been 367K. Also since 1974 claims have been below the 300K level only 109 times in 1,985 weeks or only 5.5% of the time. Claims fall below the 350K level and stay above the 300K level 38% of the time. But claims are above the 370K mark 47% of the time. Thus claims are elevated in recession and stay that way in recovery periods.
Even though recessionary periods are relatively short, they ratchet claims up and it takes them a good part of the recovery to get back below the 350K mark. They take some time before they work down into the ‘normal zone’ leaving the level of claims high (above 370K) much more than they are moderate (350-300K). Indeed, the high claims Zone is all too normal occurring as it does 47% of the time.
But apart from claims falling to 352K in the week of Jan 13 for the previous week when claims spiked, the insured rate of unemployment fell to 2.7% its lowest level in this cycle. It was last at 2.7% in Sept of 2008.
Thus, there is quite a lot of evidence that the labor market is improving - really.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.