The US got some good news, albeit qualified, on the job front today from the Department of Labor. The level of initial jobless claims last week fell to 366,000, the lowest level since a normal recession turned into something historically ugly:
In the week ending December 10, the advance figure for seasonally adjusted initial claims was 366,000, a decrease of 19,000 from the previous week’s revised figure of 385,000. The 4-week moving average was 387,750, a decrease of 6,500 from the previous week’s revised average of 394,250.
The advance seasonally adjusted insured unemployment rate was 2.9 percent for the week ending December 3, unchanged from the prior week’s revised rate.
The advance number for seasonally adjusted insured unemployment during the week ending December 3 was 3,603,000, an increase of 4,000 from the preceding week’s revised level of 3,599,000. The 4-week moving average was 3,666,250, a decrease of 5,000 from the preceding week’s revised average of 3,671,250.
If claims remain at this level — and remember, these are seasonally-adjusted numbers — then this is good news. While a level of 366K doesn’t indicate a healthy level of job creation, it at least signals that job destruction has slowed significantly. We need to get much lower than 366K, and stay there consistently, to expect job-creation numbers to correspondingly increase.
So why do I say “qualified” above? I’ve charted the data on this series since the first week of 2000, along with the “covered employment” workforce levels in this DoL series (divided by 100 to make the chart readable), and the chart shows why this is qualified good news:
The numbers on the X-axis are the weeks, as I did this quickly and didn’t have time to change them into year numbers. The 53 marker is the first week of 2001, 105 the first week of 2002, and so on. The last two weeks of weekly claims figures are not on this chart, as the DoL has not updated their historical tables as of yet, but otherwise you would see a significant dip at the end.
This chart gives us a couple of things to keep in mind. First, the actual level of this series that correlates with job expansion is, as I have written many times, between 300-325K, and only when hitting that level consistently. The covered-employment level is an interesting correlation as well. That didn’t rise until well after the weekly claims level dropped consistently into that 300K level. This would tend to substantiate that job growth is a lagging indicator in a recovery.
None of this is terribly significant if this week’s results are an anomaly rather than a trend, but we have seen this level dropping the last few weeks. In 2010, we saw a similar decline of around 15-20K claims from the end of October to the end of December, which continued declining into the first quarter to the level of 380K before the gas price shock hit. That wasn’t a seasonal anomaly then, as seasonal adjustments have already been applied.
Reuters is unabashedly optimistic, and even pulls out the U-word:
New U.S. claims for unemployment benefits dropped to a 3-1/2 year low last week, a government report showed on Thursday, suggesting the labor market
recovery was gaining speed.
Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 366,000, the Labor Department said. That was the lowest level since May 2008.
The prior week’s claims data was revised up to 385,000 from the previously reported 381,000.
Economists polled by Reuters had forecast claims rising to 390,000 last week.
The unexpected drop in claims last week pushed them closer to the 350,000 mark that analysts say signals labor market strength.
Er, now it’s the 350K mark that signals labor market strength? Once again, I’d like to see the calculations they made that show labor market gains while the claims level sustains itself at 350K. I’ve run the numbers several times, and I don’t see any period in the last twenty years where a consistent 350K level of initial claims correlates with job-creation strength. It’s the 400K myth, marked down slightly, but not enough.