Weekly Unemployment Claims Unexpectedly Jump To 372,000

by: Doug Short

The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 372,000 new claims number was a 10,000 increase from a 12,000 upward adjustment of the previous week. The less volatile and closely watched four-week moving average, which is usually a better indicator of the recent trend, rose to 360,000. Here is the official statement from the Department of Labor:

In the week ending December 29, the advance figure for seasonally adjusted initial claims was 372,000, an increase of 10,000 from the previous week's revised figure of 362,000. The 4-week moving average was 360,000, an increase of 250 from the previous week's revised average of 359,750.

The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending December 22, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending December 22 was 3,245,000, an increase of 44,000 from the preceding week's revised level of 3,201,000. The 4-week moving average was 3,224,250, an increase of 6,500 from the preceding week's revised average of 3,217,750.

Today's seasonally adjusted number was above the Briefing.com consensus estimate of 365K.

The unemployment report footnotes for the previous week's unadjusted data identifies one state with a decrease of more than 1,000 layoffs (California, where claims fell by 11,789) and 21 states with an increase of more than 1,000 new claims (Ohio topping that list with 8,795 new claims).

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 associated with Sandy. The recent dots put us back at pre-Sandy levels.

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.

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).

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.

A Four-Year Comparison

Here is 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. Here, too, we see a clear illustration of the Superstorm rise and fall in the moving average.

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