Jobless claims drop to 352K, but housing starts drop as well

posted at 9:15 am on January 19, 2012 by Ed Morrissey

Two economic indicators delivered unexpected results, but in opposite directions.  First, the number of weekly initial jobless claims fell a stunning 50,000 to 352K, the lowest level in almost four years:

In the week ending January 14, the advance figure for seasonally adjusted initial claims was 352,000, a decrease of 50,000 from the previous week’s revised figure of 402,000. The 4-week moving average was 379,000, a decrease of 3,500 from the previous week’s revised average of 382,500.

The advance seasonally adjusted insured unemployment rate was 2.7 percent for the week ending January 7, a decrease of 0.2 percentage point from the prior week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending January 7, was 3,432,000, a decrease of 215,000 from the preceding week’s revised level of 3,647,000. The 4-week moving average was 3,576,250, a decrease of 34,000 from the preceding week’s revised average of 3,610,250.

That’s a pretty dramatic drop, and a change in the opposite direction one would expect for the end of seasonal hiring if the seasonal adjustments were off, as some suspected.  Not surprisingly, Reuters is rather stoked about the news:

New applications for unemployment benefits dropped to a near four-year low last week, a government report on Thursday showed, pointing to continued improvement in the labor market.

The Labor Department said initial claims for state unemployment benefits dropped 50,000 to 352,000, the lowest level since April 2008 and the biggest drop since September 2005. The prior claims data was revised up to 402,000 from the previously reported 399,000.

Economists polled by Reuters had expected claims to fall only to 385,000. Last week’s claims data covered the survey period for January nonfarm payrolls and claims dropped by 14,000 between the December and January survey periods.

A single week is nothing to get excited about, but the previous week’s 402,000 looks more like an outlier in the series, which had been moving to a range of around 360-370K in the weeks preceding it.  That’s better than the 400K range we had for most of 2011, but it’s still above the level correlating to sustained and significant job creation, which is around 325K.  We’ll see what the next few weeks bring, but watch the 4-week moving average, which tends to wring out the momentary swings and give a better picture of the series results.

Meanwhile, the housing market provided a dash of cold water today:

 Housing starts fell in December asgroundbreaking on rental property posted a big decline, splashing some cold water on hopes the still-weak housing sector could boost economic growth this year.

The Commerce Department said on Thursday housing starts fell 4.1 percent to a seasonally adjusted annual rate of 657,000 units.

Economists polled by Reuters had forecast housing starts edging down to a 680,000-unit rate in December.

Rental properties had been a relatively active market over the last few years, thanks to the demand created by people who can’t afford to buy a home any longer.  This could be a problem if it becomes a sustained pattern, especially if foreclosures continue to rise.


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First, the number of weekly initial jobless claims fell a stunning 50,000 to 352K

Break out the champagne. It’s recovery spring. At least until they revise the number.

The Rogue Tomato on January 19, 2012 at 9:20 AM

Don’t these number get quietly “adjusted” after a few weeks and the headlines have had their impact?

That usually seems to be the case.

“Unemployment at record 0.0%!!!!!!!!”

Weeks later in a tiny space on page P76 … “Earlier numbers reporting 0.0% unemployment have been readjusted. The new figure is 8.9% unemployment.”

darwin on January 19, 2012 at 9:20 AM

SUCCESS! Just in time for another debt-ceiling hike.

Bishop on January 19, 2012 at 9:21 AM

Rental properties had been a relatively active market over the last few years, thanks to the demand created by people who can’t afford to buy a home any longer.

Not quite right.

Lots of people out there are renting who can afford to buy quite easily. They just don’t want to buy. In fact it’s cheaper to buy than rent in many markets right now. Even so, people don’t want to touch real estate right now.

angryed on January 19, 2012 at 9:21 AM

OT:
Texas can turn off the light;
our Governor is comin’ home.

Ladysmith CulchaVulcha on January 19, 2012 at 9:22 AM

OT – per Drudge, Perry going home; dropping out of the race.

mike in NV on January 19, 2012 at 9:23 AM

Don’t worry that number will be revised upward

cmsinaz on January 19, 2012 at 9:24 AM

Waiting for the adjusted numbers, and for the ‘other factors’ that were not involved in the numbers.

KOOLAID2 on January 19, 2012 at 9:27 AM

This is nothing more than the left wing, liberal media (CNN, ABC, The Washington Post, The New York Times, et al) conjuring up potential positives for Obama. Expect to see many more of these creative statistics as the year progresses.

rplat on January 19, 2012 at 9:30 AM

Good news. What has changed over the last few months that would encourage hiring? I’m an employer and I’ve seen nothing, but others must have.

ReaganWasRight on January 19, 2012 at 9:32 AM

Sooooo now we’re down to 6.5% unemployment?

“Happy days are here again ..”

VibrioCocci on January 19, 2012 at 9:33 AM

I’m encouraged by the inital number, but I’ll be curious to see what the revision is next week. If it’s ~5k, then I’ll be pleasantly surprised. But i’m expecting a significant revision. Either way, more people working is good for the US as a whole.

todler on January 19, 2012 at 9:34 AM

My condolences on the bad news for Real America. Hey, at least housing starts dropped. You’ll get em next time!

KeninCT on January 19, 2012 at 9:35 AM

Another example of why the weekly initial claims number is not trustworthy: It is simply too volatile. The 4-week average continues to drop, and that is the important metric here. We continue to make progress, and the next employment report in 2 weeks should be good. Also, first look at 4Q11 GDP is due next week, and that will be very telling. The trend is obviously up, and the economy is looking better … markets continue to move up, and Dow 13K is now in sight … the rally continues …

TouchdownBuddha on January 19, 2012 at 9:45 AM

Not quite right.

Lots of people out there are renting who can afford to buy quite easily. They just don’t want to buy. In fact it’s cheaper to buy than rent in many markets right now. Even so, people don’t want to touch real estate right now.

angryed on January 19, 2012 at 9:21 AM

Well, that’s partly true but it’s not the whole story-plenty of people in my market do want to buy and own real estate. They just can’t get any lender to give them a mortgage.

I have been trying to sell a house for almost 2 years now. I have multiple people wanting to buy it, but none can get a mortgage-one of the most passionate buyers is retired military and already has VA mortgage approval, but the VA told him that now they will only lend on brand-new houses.

The others have been from lender to lender. None will give them mortgages. Many of them have asked me about whether I would do an “owner financing” or “rent-to-own” deal, but I am very wary of those and have been saying no.

Thank You President O’bama.

Del Dolemonte on January 19, 2012 at 9:50 AM

So another 350k people lost their jobs. The folks thinking this is good news are dopes. Are we just running out of people to lay off?

During the W Bush Administration the hyenas in the media howled twenty four hours a day over news like this.

dogsoldier on January 19, 2012 at 10:01 AM

My rentals never sit empty for long, and new tenants usually ask for longer leases to save themselves some inflationary rent-hikes.

The tough part seems to be coming up with the 20% down payment, or having an FHA loan and then the FHA appraiser doesn’t grade the house for what the buyer is asking. Good news for me, bad news for buyers.

Bishop on January 19, 2012 at 10:07 AM

Break out the champagne. It’s recovery spring. At least until they revise the number.

The Rogue Tomato on January 19, 2012 at 9:20 AM

The only consistency in the numbers is they are ALWAYS revised to the worse. Darn near every time in the past 3 years.

This happening once in a while would be expected. Happening consistently and always to the bad means MALICE. As in the number is being deliberately reported as better than it really is for the benefit of the Regime, then revised to accuracy later when there will be no screaming headlines.

wildcat72 on January 19, 2012 at 10:08 AM

Love the pic, but is it NOW HIRING THE NATL. ORG. OF WOMEN or NATL. ORG. OF WOMEN HIRING NOW?

JimboHoffa on January 19, 2012 at 10:13 AM

Who’s hiring? What sectors? Just because there was a drop in the number of lay-offs, doesn’t necessarily translate into hiring. I certainly don’t remember a big hiring jump leading up to the holidays, so a week or two of higher layoffs would seem all that’s necessary to return to the pre-holiday workforce levels. We all know the drop in the unemployment rate is almost entirely due to people dropping out of the labor market as opposed to new hires.

The fact is, most companies have been running at skeleton crews for the last three years. They’ve learned how to get by on the labor force they have and without a reason to expand their business model, there’s no reason to take on increased employees. And what has changed over the last three months to alter the outlook for expansion? Nothing. Right? So there’s been no impetus for increased hiring.

Of course, I could be dead wrong and the economy could be looking up, or people could be buying into the media forecasts; though I wouldn’t put a lot of faith into companies who rely on media forecasts.

BKeyser on January 19, 2012 at 10:16 AM

Revise the numbers until it suits them, it doesn’t matter – Most of the lay-off are in manufacturing. Long term problems.

batterup on January 19, 2012 at 10:18 AM

Maybe unemployment has hit bottom and we’re on the way upwards to libtopia. Nah, I don’t believe anything outta this regime. They just fudged the numbers again.

Kissmygrits on January 19, 2012 at 10:19 AM

I have been trying to sell a house for almost 2 years now. I have multiple people wanting to buy it, but none can get a mortgage-one of the most passionate buyers is retired military and already has VA mortgage approval, but the VA told him that now they will only lend on brand-new houses.

Del Dolemonte on January 19, 2012 at 9:50 AM

Cash for Clunkers, aka VA Stimulus.

unclesmrgol on January 19, 2012 at 10:36 AM

Good news. What has changed over the last few months that would encourage hiring? I’m an employer and I’ve seen nothing, but others must have.
ReaganWasRight on January 19, 2012 at 9:32 AM

How about providing a service people need or want?

Isserley on January 19, 2012 at 10:40 AM

Good news all around, here in Mass. we lost 6200 jobs and the unemployment rate dropped to 6.8%…..amazing! Keep cheering Ed.

All Hail………..

dmann on January 19, 2012 at 11:38 AM

Well the drop in housing is a result of oversupply in the rental market. There are some markets, like Austin (TX), where the builders built a lot of apartments over the last 5 years with the assumption that the American dream was changing. However, as rents went up (since these rental properties had still not come online), folks started buying single family homes again (this month’s report shows a 4.5% up-tick in that segment). If this continues – it’s a healthy trend because it shows the American dream is alive and well, and builders can focus on single family homes again.

All of this could have been avoided if the builders had been looking at second and third order derivatives of the real estate value functions, would have prevented knee-jerk short-term responses which always lose money.

peter_griffin on January 19, 2012 at 11:46 AM

peter_griffin on January 19, 2012 at 11:46 AM

Keep spinning dude

The strong finish to 2011 enabled the industry to surpass 2010 totals in both starts and permits. Builders started 606,900 housing units in 2011, 3.4% more than in 2010. Housing permits came in at 611,900, 1.2% higher than a year earlier.

Only 583,900 homes were actually completed during the year, however, a drop of more than 10% compared with the 651,700 units completed in 2010.

dmann on January 19, 2012 at 11:58 AM

So another 350k people lost their jobs. The folks thinking this is good news are dopes. Are we just running out of people to lay off?

During the W Bush Administration the hyenas in the media howled twenty four hours a day over news like this.

dogsoldier on January 19, 2012 at 10:01 AM

..good catch. I never thought about that. These ARE first-time jobless claims after all. Another interesting tidbit to add to such things like the bogus shrinking-denominator unemployment percentage,

The War Planner on January 19, 2012 at 12:08 PM

How about providing a service people need or want?

Isserley on January 19, 2012 at 10:40 AM

You’re a jerk. I own a furniture company in a town that makes the majority of furniture for this country. No one is hiring and if they were no one wants to work. For the jobs I’ve put out there, all I get is people asking me to pay cash under the table so they can keep getting unemployment.

But your response didn’t answer my question. What has changed? I meant it seriously. I really do hope for lower unemployment because it’s good for business. I just don’t see anything changing economically that would encourage businesses to hire.

ReaganWasRight on January 19, 2012 at 12:24 PM

Expect all bad government statistics to continually improve as this election year progresses. By the first week of November the unemployment numbers will be nominal because the government will consider anyone under 30 to be a minor and anyone over 50 will disappear in a puff of smoke.

Government statistics. Positive or negative they are all a bunch of meaningless manipulated hooey – pablum for the voting sheeple.

AttaBoyLuther on January 19, 2012 at 12:28 PM

Lots of people out there are renting who can afford to buy quite easily. They just don’t want to buy. In fact it’s cheaper to buy than rent in many markets right now. Even so, people don’t want to touch real estate right now.

angryed on January 19, 2012 at 9:21 AM

Be fearful when others are greedy and be greedy only when others are fearful. – Warren Buffet

bbordwell on January 19, 2012 at 12:58 PM

High tech manufacturing jobs down 30% in the last decade -http://www.chicagotribune.com/business/breaking/chi-us-hightech-manufacturing-jobs-down-by-nearly-30-20120117,0,755732.story

Red Creek on January 19, 2012 at 2:47 PM

Ok, 352k jobs lost. Times 4 is 1.408 million. New jobs about 100k a month. So how is it that the unemployment rate is going down? How big of a pan does it take for obama to cook the books this much?

cjt1957 on January 19, 2012 at 3:26 PM

Sooooo now we’re down to 6.5% unemployment?
“Happy days are here again ..”
VibrioCocci on January 19, 2012 at 9:33 AM

In the week ending January 14, the advance figure for seasonally adjusted initial claims was 352,000, a decrease of 50,000 from the previous week’s revised figure of 402,000. The 4-week moving average was 379,000, a decrease of 3,500 from the previous week’s revised average of 382,500.

Lets see
352,000 + 402,000 = 754000 jobs lost in the last 2 weeks and
a 4-week moving average was 379,000 =1,516,000
unless more than 1,516,000 jobs have been added, the unemployment rate could not have gone down!
I’m sure that the Obama admin will spin it as a reduction in the number of unemployment, and the lap dog Obama knee pad brigade “aka the msm” will repeat it endlessly.

DSchoen on January 19, 2012 at 8:37 PM

I’m actually more inclined to believe that this past week’s seasoning, producing the unusually-low number, was an outlier. From Tom Blumer (emphasis in the original):

While it would be really easy to say, “Yeah, that’s great,” someone is going to have to explain to me how a 5% drop in actual claims from the same week a year ago (522K vs. 550K) generates a 15% drop after seasonal adjustment (352K vs. 415K).

The seasonal adjustment factor for the same week a year ago was 132.5 (i.e., 550K divided by 132.5 equals 415K seasonally adjusted).

This year’s factor was 148.2 (i.e., 521,613 divided by the seasonally adjusted result of 352,000). Readers can find the factor used by going to the interactive tool here.

If last year’s factor had been used on this year’s raw number, seasonally adjusted claims would have been 394,000 (521,613 divided by 132.5), which is not much better than last week’s (revised upward, as usual) 402,000.

The DOL, when pressed for an explanation, said that the difference in when the Christmas/New Year’s firings happen is the difference between this year’s and last year’s seasoning. Tom, in more, and gentler than this summary, words says that’s a bunch of Bravo Sierra.

Steve Eggleston on January 20, 2012 at 8:09 AM