New Jobless Claims At 323K, Well Below Forecast

by: Doug Short

The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 323,000 new claims number was a 21,000 decline from the previous week's 344,000 (an upward revision from 339,000). The less volatile and closely watched four-week moving average, which is usually a better indicator of the trend, declined by 6,750 to 338,500.

Here is the opening of the official statement from the Department of Labor:

In the week ending November 16, the advance figure for seasonally adjusted initial claims was 323,000, a decrease of 21,000 from the previous week's revised figure of 344,000. The 4-week moving average was 338,500, a decrease of 6,750 from the previous week's revised average of 345,250.

The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending November 9, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending November 9 was 2,876,000, an increase of 66,000 from the preceding week's revised level of 2,810,000. The 4-week moving average was 2,856,750, an increase of 6,500 from the preceding week's revised average of 2,850,250.

Today's seasonally adjusted number came in well below the forecast of 335K.

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

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. Here is the complete data series.

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 secular trends. I've now added a linear regression through the data. We can see that this metric continued to fall below the long-term trend stretching back to 1968.

A Four-Year Comparison

Here is an overlay of the past three calendar years and the beginning of 2013 using the 4-week moving average. The purpose is to show the relative annual slope of improvement since the peak in the spring of 2009. This year got off to an excellent start. It then oscillated a bit, stalled for about nine weeks and then headed lower from early July until October. After four reports in the wrong direction (largely resulting from computer upgrades in some states), the trend is clearly on the mend.

For an analysis of unemployment claims as a percent of the labor force, see my recent commentary What Do Weekly Unemployment Claims Tell us About Recession Risk? Here is a snapshot from that analysis.

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