Weekly Unemployment Claims At 370K: Back To The Pre-Sandy Range

Includes: DIA, SPY
by: Doug Short

The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 370,000 new claims number was a 25,000 decrease from a 2,000 upward adjustment of the previous week as the impact of Sandy continues to abate. The less volatile and closely watched four-week moving average, which is usually a better indicator of the recent trend, rose to 408,000. Given the impact of Hurricane Sandy, the four-week MA will show a skew for the next couple of weeks. Here is the official statement from the Department of Labor:

In the week ending December 1, the advance figure for seasonally adjusted initial claims was 370,000, a decrease of 25,000 from the previous week's revised figure of 395,000. The 4-week moving average was 408,000, an increase of 2,250 from the previous week's revised average of 405,750.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending November 24, a decrease of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 24 was 3,205,000, a decrease of 100,000 from the preceding week's revised level of 3,305,000. The 4-week moving average was 3,309,000, an increase of 7,750 from the preceding week's revised average of 3,301,250.

Today's seasonally adjusted number was well below the Briefing.com consensus estimate of 382K.

Here is a close look at the data over the past few years (with a callout for 2012), which gives a clearer sense of the overall trend in relation to the last recession and the trend in recent weeks.

In the callout, note the spike in red dots for associated with Sandy. The most recent dot puts us back in the pre-Sandy ballpark, but the 4-week moving average will continue to remain elevated until those Sandy-related dots are more than four weeks behind the latest data.

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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.

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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

At the suggestion of Mike Shedlock, of Global Economic Trend Analysis, I've created an overlay of the past four-year calendar years using the 4-week moving average. The purpose is to show the relative slope of improvement since the peak in the spring of 2009.

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

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