Thread: Weekly Claims Show Job Stagnation for Entire Year

Thursday, November 04, 2010

Weekly Claims Show Job Stagnation for Entire Year

After movement in both directions over the past couple months, weekly claims are back where they have been for nearly a year, right around the 450,000 mark.

Please consider the Unemployment Weekly Claims Report for November 4, 2010. http://www.dol.gov/opa/media/press/eta/ui/current.htm

In the week ending Oct. 30, the advance figure for seasonally adjusted initial claims was 457,000, an increase of 20,000 from the previous week's revised figure of 437,000. The 4-week moving average was 456,000, an increase of 2,000 from the previous week's revised average of 454,000.



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The weekly claims numbers are volatile so it's best to focus on the trend in the 4-week moving average.

4-Week Moving Average of Initial Claims



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The 4-week moving average is still near the peak results of the last two recessions. It's important to note those are raw numbers, not population adjusted. Nonetheless, the numbers do indicate broad, persistent weakness.

4-Week Moving Average of Initial Claims Since 2006



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No Lasting Improvement for 12 Months

There has been no lasting improvement for nearly a year. Weekly claims have generally been in the 440,000 to 480,000 range with the 4-week moving average practically pinned to the 450,000 mark.

To be consistent with an economy adding jobs coming out of a recession, the number of claims needs to fall to the 400,000 level.

At some point employers will be as lean as they can get (and still stay in business). Yet, that does not mean businesses are about to go on a big hiring boom. Indeed, unless consumer spending picks up, they won't.

Questions on the Weekly Claims vs. the Unemployment Rate

A question keeps popping up in emails: "How can we lose 400,000+ jobs a week and yet have the unemployment rate stay flat and the monthly jobs report show gains?"

The answer is the economy is very dynamic. People change jobs all the time. Note that from 1975 forward, the number of claims was generally above 300,000 a week, yet some months the economy added well over 250,000 jobs.

Also note that the monthly published unemployment rate is from a household survey, not a survey of payroll data from businesses. That is why the monthly "establishment survey" (a sampling of actual payroll data) is not always in alignment with changes in the unemployment rate. At economic turns the discrepancy can be wide.

Where To From Here?

Four weeks ago the weekly claims print was 475,000. That number will roll off the 4-week moving average next week. Thus any number lower than 475,000 will cause the 4-week moving average to drop.

Assuming we get a print of 450,000, next week's 4-week moving average will decline to ... drum roll please ... 450,000.

As measured from weekly claims, the economy has been stagnant for a year. However, there is upward pressure on the number in light of cutbacks by state and local governments.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot. ... n-for.html

Thursday, November 04, 2010

Gaming the Jobs Report: TimTabs +75,000, ADP +43,000, Bloomberg +60,000, Gallup Sees Unemployment Rising to 9.7% to 9.9%

Friday's jobs reports will be out shortly. Here is how some see it, late Thursday evening.

Gallup

Gallup Finds U.S. Unemployment Likely to Be Up on Friday http://www.gallup.com/poll/144170/Gallu ... riday.aspx

Gallup analysis suggests the October unemployment rate that the government reports on Friday will be in the 9.7% to 9.9% range. This is despite the fact that unemployment, as measured by Gallup without seasonal adjustment, fell sharply to 9.4% at the end of October -- down from 10.0% in mid-October and 10.1% at the end of September. Most of this drop took place after the official Labor Department measurement period, suggesting the government's October report may not pick up this late-month decline.



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Relationship to the Official U.S. Unemployment Rate

Gallup's end-of-October data suggest that the unemployment rate plunged during the last half of the month. However, most of the improvement took place after the measurement period for the government's jobs report, due out Friday. Over that period, Gallup's unemployment measure, which is not seasonally adjusted, increased from 9.4% in mid-September to 10.1% at the end of September and 10.0% in mid-October. As a result, Gallup analysis suggests the government's seasonally adjusted October unemployment rate is likely to increase into the 9.7% to 9.9% range when it is reported on Nov. 5.

Why the Decline in Unemployment?

In part, the sharp improvement in the unemployment rate and in underemployment during late October may be explained by the approaching holiday sales season. Halloween is becoming a bigger holiday and could be responsible for some added hiring. Further, some retailers are starting their Christmas sales early, anticipating a flat sales period, and could be adding jobs. Both of these possibilities are consistent with the ADP report that private-sector service jobs grew by 77,000 in October.

Another more speculative possibility involves Federal Reserve policy and the midterm elections. Many companies seem to have simply put a hold on new activities, including hiring, during late September and early October, as the economy seemed to be weakening more than expected and the business operating environment seemed more uncertain than normal.

Regardless of the reason -- and although it was too late to help political incumbents on Tuesday -- it appears that the jobs situation showed substantial improvement in late October. Now, it is up to the Fed and the new Congress to build on what appears to be some late October jobs momentum.

Gallup was wrong each of the last two months. Do they have it correct this month?

ADP

The ADP National Employment Report http://www.adpemploymentreport.com/

Private-sector employment increased by 43,000 from September to October on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from August to September was revised up from the previously reported decline of 39,000 to a smaller decline of 2,000. Since employment began rising in February, the monthly gain has averaged 34,000 with a range of -2,000 to +65,000 during the period. October’s figure is within this recent range and is consistent with the deceleration of economic growth that occurred in the spring. Employment gains of this magnitude are not sufficient to lower the unemployment rate. Given modest GDP growth in the second and thirds quarters, and the usual lag of employment behind GDP, it would not be surprising to see several more months of lethargic employment gains, even if the economic recovery gathers momentum.

ADP and Gallup say the same thing. More jobs, higher unemployment rate.

TrimTabs

Via email, no link available...

Sausalito, CA – November 3, 2010 – TrimTabs Investment Research estimates that the U.S. economy added 95,000 jobs in October, the first monthly increase since May.

“The economy clearly improved in October,â€