Weekly initial jobless claims drop to 350K, but …

posted at 9:21 am on July 12, 2012 by Ed Morrissey

Plenty of news on the economic front today, most of it poor, but one significant bright spot did shine this morning — at least for a moment or two.  The Department of Labor reported that initial jobless claims dropped last week by 26,000 to a four-year-low 350,000:

In the week ending July 7, the advance figure for seasonally adjusted initial claims was 350,000, a decrease of 26,000 from the previous week’s revised figure of 376,000. The 4-week moving average was 376,500, a decrease of 9,750 from the previous week’s revised average of 386,250.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending June 30, unchanged from the prior week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending June 30 was 3,304,000, a decrease of 14,000 from the preceding week’s revised level of 3,318,000. The 4-week moving average was 3,308,500, an increase of 1,250 from the preceding week’s revised average of 3,307,250.

That sounds like great news, and it would be — if last week didn’t have a holiday right in the middle of it.  Independence Day, a national holidy, was on Wednesday, and government offices were closed up tight.  Most businesses were closed for at least one day, if not more, so hiring and termination activity would have slowed as well.  Each year, we see an artificially low figure around the Fourth of July, and this looks like another round.

Zero Hedge and Steve Eggleston question the amount of seasonal adjustment going on as well:

I’m not as concerned with seasonal adjustments, although it should be noted that unadjusted claims did go up, as ZeroHedge points out, by 69,971.  I am assuming that there was probably a significant amount of estimation going on in state reporting over the holiday, and that we’ll see a big boost upward next week in the adjustment.  (Last week’s number of 374K got adjusted upward to 376K, the latest in an improbably long series of upward rather than downward revisions.)

Reuters cheered the results, but added a caveat … in the eighth paragraph:

The drop, which brought new claims to their lowest level since March 2008, was much steeper than Wall Street economists expected. The prior week’s figure was revised slightly higher to 376,000 from the previously reported 374,000.

Hiring by U.S. companies slowed dramatically in the second quarter as employers grew worried about Europe’s snowballing debt crisis, which is weighing on the global economy. Many employers also are concerned over the possibility the U.S. government may cut spending and let tax cuts expire next year, which could send the economy into recession.

The level of new claims for unemployment insurance was the lowest since March 2008 — the early days of the 2007-2009 recession. …

Still, the jobless claims data had an important caveat. A Labor Department official noted that part of the drop might be due to some auto manufacturers keeping their plants open during the first week of July to meet demand.

Normally plant closures during that week would lead to a spike in jobless claims, but they did not materialize. That suggests part of the strength in the labor market last week might be due to temporary factors.

On the other hand, import prices fell sharply:

U.S. import prices fell last month by the most in more than three years mostly due to a plunge in the cost of imported oil, further icing inflation pressures.

Overall import prices dropped 2.7 percent, the Labor Department said on Thursday. It was the third straight month of declining prices for goods and services bought abroad.

Import prices have only risen once in the last seven months. June’s decline was the steepest since December 2008.

Export prices also fell by 1.7%, the second straight month of decline.  That comes from a lack of demand, and not just in gasoline.  That’s why the numbers on the weekly jobless claims look like an outlier than a trend, especially around the holiday.  With prices falling and retail sales in retreat, there doesn’t seem to be any reason to expect a sudden boom in job creation.

Even Warren Buffett is sounding more bearish today:

Warren Buffett has changed his view on the U.S. economy.

In a live CNBC interview from Sun Valley with Becky Quick of “Squawk Box,” Buffett says the general economy’s growth has slowed so that it is now essentially “flat.” …

Buffett also says things are beginning to “slip pretty fast” in Europe, especially over the past six weeks.  He’s confident “they’ll get it worked out” by ten years from now, but right now there’s no obvious answer.

At least the Fed doesn’t seem interested in launching another round of quantitative easing, but that option isn’t off the table yet, either.  The decline in import and export prices means that inflation is no longer a worry, but deflation might be, and a QE3 would keep that from happening.  Don’t be surprised to see more hints and pressure on the Fed to act in the next couple of months if the economy keeps trending downward.


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…wait for the revision!

KOOLAID2 on July 12, 2012 at 9:23 AM

…Nutstuyu!

KOOLAID2 on July 12, 2012 at 9:24 AM

…liars figure…figures lie!

KOOLAID2 on July 12, 2012 at 9:24 AM

…not today!

KOOLAID2 on July 12, 2012 at 9:25 AM

He’s confident “they’ll get it worked out” by ten years from now, but right now there’s no obvious answer.

Only ten years from now, way to go out on a limb there, Buffett.

Bishop on July 12, 2012 at 9:25 AM

…oh wait!…maybe I can aggravate some people!

KOOLAID2 on July 12, 2012 at 9:26 AM

Hey, you know what the economy needs? Higher taxes! More regulation! Yeah, that’s the ticket.

MTF on July 12, 2012 at 9:27 AM

I remember a time when no one waiting patiently for these reports.

Electrongod on July 12, 2012 at 9:27 AM

…hey!…I got an idea…let’s do a 2 trillion dollar stimulus!

KOOLAID2 on July 12, 2012 at 9:28 AM

Tom Blumer also questioned the seasoning. Had last year’s July 4th-week seasoning been applied, he says that this week’s adjusted number would be 380K.

As for the inevitable upward adjustmnet, the bidding starts at +10K.

Steve Eggleston on July 12, 2012 at 9:29 AM

This, along with the breaking news that Mitt is a reincarnated Hitler, spells an obvious recovery for the American economy. Happy days are here again thanks to TFGRP.

Bishop on July 12, 2012 at 9:30 AM

Considering they can’t get the number right in the first place, why don’t they just wait another week before they put out the number? Wouldn’t that save then a whole lot of embarassment evey week?

dirtseller on July 12, 2012 at 9:31 AM

IMHO: The amount of money just sitting on the sidelines right now is the biggest vote of no confidence in a President and his policies since Jimmuh.

Only way to get back on the right track starts in November.

Difficultas_Est_Imperium on July 12, 2012 at 9:31 AM

Steve – that is probably the floor – I’ll take revisions for 20,000 Alex.

Zomcon JEM on July 12, 2012 at 9:33 AM

Considering they can’t get the number right in the first place, why don’t they just wait another week before they put out the number? Wouldn’t that save then a whole lot of embarassment evey week?

dirtseller on July 12, 2012 at 9:31 AM

Because the historical pattern over the last 30+ months shows that this is being done purposefully.

Difficultas_Est_Imperium on July 12, 2012 at 9:33 AM

Considering they can’t get the number right in the first place, why don’t they just wait another week before they put out the number? Wouldn’t that save then a whole lot of embarassment evey week?

dirtseller on July 12, 2012 at 9:31 AM

The markets demand a number, and the inevitable upward revision is a recent invention. That’s not to say that upward revisions weren’t the rule in the past; they were leavened with occassional downward revisions and no revisions before last year.

Steve Eggleston on July 12, 2012 at 9:34 AM

…hey!…I got an idea…let’s do a 2 trillion dollar stimulus!

KOOLAID2 on July 12, 2012 at 9:28 AM

After the election once Obama has more “flexibility”.

Doughboy on July 12, 2012 at 9:35 AM

Zero Hedge and Steve Eggleston question the amount of seasonal adjustment going on as well:

Zero Hedge is the absolute master of debunking these phony numbers by the BLS.

At least the Fed doesn’t seem interested in launching another round of quantitative easing, but that option isn’t off the table yet, either.

If QE3 is going to happen, I think it will be after the election. It appears Obama’s strategy is to massage the job loss numbers and hold off QE3 to keep oil/gold down and the US dollar up until after the voting.

Doomberg on July 12, 2012 at 9:36 AM

Zero Hedge is the absolute master of debunking these phony numbers by the BLS.

Doomberg on July 12, 2012 at 9:36 AM

Who do you think I’m learning from? :-)

Steve Eggleston on July 12, 2012 at 9:37 AM

People like Obama because he makes math easy.

RBMN on July 12, 2012 at 9:40 AM

The 4-week average is finally moving in the right direction, but the markets are in a funk this morning primarily over the China slowdown and continued issues in Europe. Earnings season has been mixed at best, as the second quarter slowdown took a toll on profits. We are not expecting much from 2Q12 GDP. Some signs that the slowdown is moderating and activity is picking up, but the economy will probably be slow for the foreseeable future. Too many headwinds right now …

TouchdownBuddha on July 12, 2012 at 9:41 AM

Don’t forget the derecho! Last week, power was out in wide swaths of a half a dozen states for many days. Hard to file for unemployment when streets are closed, internet is down, gas station lines are backed up a couple blocks from people filling up gas cans for generators, etc. Here in Virginia, it resembled scenes from Mad Max and War of the Worlds. People too busy surviving to take a day off to file for unemployment.

PaddyORyan on July 12, 2012 at 9:45 AM

Those pesky earthquakes and tsunamis…

blatantblue on July 12, 2012 at 9:48 AM

The media will NOT report the holiday for the massive drop.

But next week they WILL report the spike due to “last week being a holiday.”

Bank on it.

kevinkristy on July 12, 2012 at 9:51 AM

The 4-week average is finally moving in the right direction, but the markets are in a funk this morning primarily over the China slowdown and continued issues in Europe. Earnings season has been mixed at best, as the second quarter slowdown took a toll on profits. We are not expecting much from 2Q12 GDP. Some signs that the slowdown is moderating and activity is picking up, but the economy will probably be slow for the foreseeable future. Too many headwinds right now …

TouchdownBuddha on July 12, 2012 at 9:41 AM

Assuming this week’s drop is real, that is. There’s more headwinds than an eyewall of a hurricane, and most of them are self-inflicted.

Steve Eggleston on July 12, 2012 at 9:52 AM

TouchdownBuddha on July 12, 2012 at 9:41 AM

Right. China and Europe. Yada yada.

Nothing to do with U.S. consumer confidence being low, manufacturing bottoming out, retail sales falling, real estate still in a funk, the uncertainty of Obamacare and Dodd Frank hampering hiring, etc.

In other words. Not Obama’s fault.

kevinkristy on July 12, 2012 at 9:57 AM

Why is Europe attacking Barry’s ambitions for a second term?!?!?!?!?!?!?

So tired of all the terrible economic news in the United States being blamed on Europe. Everyone is sitting on capital waiting on Obama to leave office.

ButterflyDragon on July 12, 2012 at 10:00 AM

We have entered the “tweak the news so it looks like the economy is getting better under Barry” season.
Between now and election day all economic news will be given an extra tweak by the media to spin it positive for Barry.

————
Read on Twitter: No president can save the economy for the next 4-5 years so we might as well re-elect Obama.

albill on July 12, 2012 at 10:03 AM

The decline in import and export prices means that inflation is no longer a worry, but deflation might be, and a QE3 would keep that from happening. Don’t be surprised to see more hints and pressure on the Fed to act in the next couple of months if the economy keeps trending downward.

.
You are having an off day, Ed.

The import and export prices are not a signal that inflation is no longer a worry.

Many publicly traded companies are facing are tough earnings reporting season. Their look ahead guidance if not considered believable will be reason enough to crater their stock. As an example, Alcoa is getting the crap beaten out of it this morning even though their CEO said their look ahead was all sunshine and unicorns after the close on Monday.

The easiest way to have rosy guidance – use the room granted by the import/export prices as an opportunity to improve your margins by “shaving” the quantity delivered in a package.

Enough companies “improving their margins” will give you an actual inflation you will find pretty painful – even though the Obama administration and the Fed will make sure it isn’t reported.

Europe is coming unzipped. The Fed is not going to act until they HAVE to take action on the collapse of the EU/euro.

My prediction is when that happens the S&P 500 will be at 950 and dropping like a stone … and the Fed throwing trillions more at the markets will only slow things down for a matter of days.

PolAgnostic on July 12, 2012 at 10:03 AM

And when the number goes back up to 380k next week, it will be unexpected.

I will say though, the fact that Obama hasn’t tanked in the polls with the economic numbers is worrying.

Have Democrats finally created a country where there are enough Democrats to make the economic numbers simply not matter? Even 15 years ago, with an economy like this, a Democrat would have been down in the polls by 10 points. Now, Obama is either winning or tied, even when you take away the blatant polling skew. It is really troubling.

milcus on July 12, 2012 at 10:07 AM

The 4-week average is finally moving in the right direction, but the markets are in a funk this morning primarily over the China slowdown and continued issues in Europe. Earnings season has been mixed at best, as the second quarter slowdown took a toll on profits. We are not expecting much from 2Q12 GDP. Some signs that the slowdown is moderating and activity is picking up, but the economy will probably be slow for the foreseeable future. Too many headwinds right now …

TouchdownBuddha on July 12, 2012 at 9:41 AM


David Axelrod! How you doing, buddy! Still slinging stuff against the wall to see what you can get to stick, I see.

/s

Nice to see the SCOAMF inspires people with his same level of understanding of the economy to come on the blogs and spin for him.

PolAgnostic on July 12, 2012 at 10:09 AM

and government offices were closed up tight.

FWIW – the closing kills all processing, knocks everything – I mean everything – back in the chain, on top of the six-month tier transitions, which will cost you another week.

Barry knows it would be better to ignore this number now, because they have a big spike coming.

budfox on July 12, 2012 at 10:09 AM

“I remember a time when no one waiting patiently for these reports.”

Then came GWB, and how the Liberal Media whined about jobless reports when unemployment was Half of what it is today.

RADIOONE on July 12, 2012 at 10:09 AM

Would’ve been simpler to say that the government had released another set of bullcrap made-up statistics that understate the situation, and will be revised to further bullcrap made-up statistics in awhile.

Seriously – why do you spend any time ‘analyzing’ this propaganda as though it were remotely accurate in the first place?

Midas on July 12, 2012 at 10:11 AM

Zero Hedge is the absolute master of debunking these phony numbers by the BLS.
Doomberg on July 12, 2012 at 9:36 AM

If only he would master writing. Good grief some of those articles are hard to read.

LoganSix on July 12, 2012 at 10:17 AM

One good reason for a drop in layoffs in the week ending July 7; Most of the managers were on vacation for at least part of the week.

Dasher on July 12, 2012 at 10:18 AM

Touchdown Budha is the most annoying lib troll on this site.

you can only find her posts whenever there is poor economic news regarding the administration- and the professorial Budha will suddenly appear with her:

“don’t worry everything is fine we are patiently waiting and we will see the headwinds go away as Europe improves and we will let you know next month how things are getting better and meanwhile we are in a holding pattern and watching developments”

literally this shill has been regurgitating the same lame lib talking points no matter WHAT the economic data is stating!

AirForceCane on July 12, 2012 at 10:27 AM

What’s that about people worrying about cuts in federal spending? Worry is the last thing to do, keep your fingers crossed it happens. As for tax cuts cancelled out next year, now that’s a worry. Obama wants to extend them only to 2013, then have them expire, get him through an election & then hell with them after.

arand on July 12, 2012 at 10:29 AM

Damn Swiss bank accounts…

Wagthatdog on July 12, 2012 at 10:54 AM

The decline in import and export prices means that inflation is no longer a worry, but deflation might be, and a QE3 would keep that from happening.

Gas is still over three dollars a gallon and inflation is no longer a worry? Wish I had your salary.

rickv404 on July 12, 2012 at 11:01 AM

I never terminate employees within 2 weeks of Christmas or during any Holiday week.

If it can’t wait or is a safety issue, they get suspended.

I’d imagine there are other businesses with similar policies.

Still – great news and I hope it’s the beginning of a trend!

Not-a-Marxist on July 12, 2012 at 11:16 AM

Will 0bama tell us “not to read too much” in to this report?

MidniteRambler on July 12, 2012 at 11:16 AM

KOOLAID2
Nice, out Bishoping, bishop……….hehe

angrymike on July 12, 2012 at 11:26 AM

These stats are just more lies from the 10s of thousands of DC bureaucrats that we taxpayers are stupid enough and cowardly enough to pay the salaries of; at an average compensation rate that is 30% or more above the private sector for comparable work and education levels.

But the HotAir pundits love it – it gives them something to write about. What they should be doing is reminding people of the lies Government promulgates everyday including econ stats like GDP, inflation, unemployemnt, etc., etc.

Falcon46 on July 12, 2012 at 11:49 AM

I have a dumb series of questions:

1) Are these union shops when they talk about auto manufacturers remaining open at a time when they traditionally close?

2) And if so, don’t unions pay dues in part to cover temporary lay-offs or strikes?

3) And finally, if auto manufacturers typically shut down during the first week of July and bring everyone back, why are they eligible for unemployment benefits? Do teachers get UE during the summer months?

BKeyser on July 12, 2012 at 11:49 AM

So unemployment numbers went down some? – how many more people filed for disability instead? – knowing unemployment is limited, but disability is forever once you get it.

dentarthurdent on July 12, 2012 at 1:30 PM

I have a dumb series of questions:

1) Are these union shops when they talk about auto manufacturers remaining open at a time when they traditionally close?

2) And if so, don’t unions pay dues in part to cover temporary lay-offs or strikes?

3) And finally, if auto manufacturers typically shut down during the first week of July and bring everyone back, why are they eligible for unemployment benefits? Do teachers get UE during the summer months?

BKeyser on July 12, 2012 at 11:49 AM

Expected answers:

1) Yes.
2) You would think so, but those union bosses’ 6-figure salaries and all the donations to Democrats don’t fund themselves.
3) Because “unemployment” insurance laws are written in such a way as to count even regularly-scheduled layoffs that last at least one week, including not only teachers’ summer vacation but also their winter and spring breaks of just over a week each, as a period of “unemployment”.

Steve Eggleston on July 12, 2012 at 6:50 PM

No president can save the economy for the next 4-5 years so we might as well re-elect Obama.

?????

No president can save the economy for the next 4-5 years so we might as well _______________.

…take an ice pick in the ear.

…move to Spain.

…give Ron Paul a shot at it ( to shut up the Paulistas).

socalcon on July 12, 2012 at 10:25 PM

BKeyser on July 12, 2012 at 11:49 AM

1. Duh.

2. Yeppers.

3. The stat is claims, not eligibility. You betcha.

{ there are no dumb questions, just dumb series…. }

socalcon on July 12, 2012 at 10:33 PM