Weekly Initial Jobless Claims improved impressively last week, but there might be a seasonal reason for what could prove to be an exaggerated improvement. I see two possibilities -- an obvious one that is likely only slightly skewing the number, and one theoretical idea that could be playing a larger role. Of course, there's also the possibility that the flow of jobless claims is legitimately improving, but I find that difficult to believe, given the flow of other economic data.
Jobless claims fell by 30,000 in the period ending October 6, declining to 339K. The four-week moving average for jobless claims also fell, by 11,500, to 375,500. It certainly would seem like good enough news if not for the time period covered.
While the Jewish holiday of Yom Kippur was on the 25th and 26th of September (outside of this reporting period) with work forbidden during the period, the Jewish holiday of Sukkot, with work likewise forbidden, ran through the period of reporting last week. This could have affected both the filing of unemployment and the processing of claims, but to what degree?
It is hard to measure the exact extent of impact for the reporting period, because religious holidays are not necessarily strictly adhered to in America by followers of all faiths today. For example, I know a great many people of my own faith who work on Good Friday. Thus, we cannot be sure of the percentage of Americans for whom the factors of faith and new unemployment mattered last week. Still, we also cannot be sure the reporting period was clear of noise. Next week's data will not be clear of holiday issues either, as it has Columbus Day to incorporate.
Another seasonal factor could have played an important role in the reported improvement. As it is earnings season, companies about to report results below their forecasts or the estimates of analysts may be saving layoff announcements to coincide with their earnings results. When a company misses, it will often take action immediately to reassure investors that it is actively working to end the trend. Thus, new jobless claims that might have been announced over the last couple of weeks may perhaps have been postponed for announcement with pending poor earnings reports. The third quarter earnings season is not expected to be robust, and earnings warnings continue to threaten stocks generally.
Looking further into the data, the insured unemployment rate was unchanged at 2.6% for the period ending September 29. The exact count of the insured unemployed improved by 15,000 to 3.27 million Americans. The number of people claiming benefits under all programs for the week ending September 22nd declined by 43,970, though still numbering 5.04 million. It's important to note that extended benefits were only available in New York.
The highest insured unemployment rates in the week ending September 22 were in Puerto Rico (3.9%), Alaska (3.7), Virgin Islands (3.7), Pennsylvania (3.2), New Jersey (3.1), California (3.1), Connecticut (2.9), Nevada (2.7), and Oregon (2.7).
The largest increases in initial claims for the week ending September 29 were in New York (+2,764), California (+2,069), North Carolina (+1,217), Pennsylvania (+989), and Arkansas (+538), while the largest decreases were in Mississippi (-3,393), Michigan (-2,639), Florida (-1,972), Ohio (-1,723), and Oregon (-1,135).
The shares of employment services companies tend to move on this data and are listed below. All of the companies are higher, and some relatively more than the move in the market represented here by the SPDR S&P 500 ETF (SPY). To the extent that the gain is more than is dictated by the general relationship of each security to the market, as represented by beta, it is likely due to the new claims data. Whether these shares hold on to the day's gains will be determined by real and lasting change in the labor market, which unfortunately, I do not see depicted in the day's reported data.
Company & Ticker
Robert Half (RHI)
Korn Ferry (KFY)
Monster Worldwide (MWW)
On Assignment (ASGN)
Kelly Services (KELYA)
SPDR S&P 500
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.