A few economic indicators out today produced genuine good news, on jobs and the housing market. Have we begun to turn the corner on growth, though, or are we just looking at normal seasonal variations? It all depends on how one looks at the numbers.
Let’s start with the weekly jobless claims, which fell to a five-year low last week:
In the week ending January 12, the advance figure for seasonally adjusted initial claims was 335,000, a decrease of 37,000 from the previous week’s revised figure of 372,000. The 4-week moving average was 359,250, a decrease of 6,750 from the previous week’s revised average of 366,000.
The advance seasonally adjusted insured unemployment rate was 2.5 percent for the week ending January 5, an increase of 0.1 percentage point from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending January 5 was 3,214,000, an increase of 87,000 from the preceding week’s revised level of 3,127,000. The 4-week moving average was 3,195,750, a decrease of 6,000 from the preceding week’s revised average of 3,201,750.
That’s a big fall in one week, but it is just one week in a volatile series. The AP’s analysis points out the deviation from the trend, but also the part played by seasonal adjustments:
The number of Americans seeking unemployment aid fell to a five-year low last week, a hopeful sign the job market is healing. But much of the decline reflects seasonal volatility in the data. …
The four-week average, a less volatile measure, fell to 359,250.
The applications data can be uneven in January. Job cuts typically spike in the second week of the month as retailers, restaurants and other companies lay off temporary workers hired for the winter holidays.
Last week, the layoffs weren’t as large as expected, a department spokesman said. That caused a steep drop in the seasonally adjusted data.
The unadjusted data looks less sunny:
The advance number of actual initial claims under state programs, unadjusted, totaled 555,708 in the week ending January 12, an increase of 2,360 from the previous week. There were 525,422 initial claims in the comparable week in 2012.
That tends to bolster the contention that this is an artifact of seasonal adjustment, although to be fair we routinely compare the adjusted numbers. On that basis, the analysis I produced a couple of years ago showed that the 325K level tended to be the highest level correlated to actual and significant job growth, and this is the first time we’ve even been close to that since the financial crisis of 2008. That has to be sustained, and it’s correlative rather than causal, of course — but anyreal shift in the right direction is good news. We’ll have to see whether this is an outlier on the data line or a trend over the next several weeks.
In the housing market, the US got two pieces of good news. First, housings starts went up by more than 12% in December, showing real life in residential construction at the end of the year:
In another piece of good economic news, home construction surged 12.1 percent in December to end best year since 2008. …
Groundbreaking to build new U.S. homes accelerated in December to its fastest pace in over four years, supporting the view that housing is poised to provide a substantial boost to the U.S. economy.
The Commerce Department said that starts at building sites for homes surged 12.1 percent last month to a 954,000-unit annual rate.
Data for U.S. housing starts can be volatile and is sometimes subject to large revisions. The government revised downward its estimate for November housing starts to a 851,000-unit rate from the originally reported 861,000.
Some of the strength in December’s reading for starts came from a 20.3 percent surge in multi-family unit construction. That component is especially volatile.
Zero Hedge notes that there is considerable swings in seasonal adjustments in this data series, but the trend has been mostly positive in 2012. At the same time, and probably not unrelated, new foreclosures dropped to a post-crisis low in December, too, although that news was also tempered somewhat:
Foreclosure activity in the United States was at a near six-year low in December and declined over the entire year as the housing market continues to recover after foreclosures peaked two years ago.
But a build-up in backlogs, brought about in part by tougher rules for lenders to foreclose, could see new spikes in foreclosure activity this year, according to a report by RealtyTrac released on Thursday. …
There were about 2.3 million foreclosure filings on 1.8 million properties in 2012. That represents a decline of 3 percent on the year before and a drop 36 percent on a peak of 2.9 million properties in 2010.
Foreclosure activity was at 68-month low in December, falling 10 percent from the previous month and 21 percent from the same time a year ago.
The settlement of the robo-signing scandal allowed lenders to clear their books in 2012, and this has allowed the housing markets to return to normal valuation mechanisms. Prices rose, showing more stability for home owners and investors, and absent more market-distorting interventions, we should see this sector return to normal, inflation-linked growth over the next several years.
The only real cloud on the horizon today came from the Fed rating on mid-Atlantic business activity:
A key index measuring business activity in the Mid-Atlantic declined in January, coming in at negative 5.8 percent. Economists polled by Reuters had predicted that the Philadelphia Fed index would tick higher from last month. They forecast the rise in new orders increased in January to give a reading of 5.8, up from 4.6 in December.
Most expect the 2012Q4 GDP to come in pretty low later this month. Perhaps that slow growth will continue into 2013Q1. If so, don’t expect that weekly jobless claim series to stay in the 335K range for long.