Weekly Claims Drop to 445,000, 4-Week Moving Average at 455,750; Where to From Here?

Weekly Claims fell this week to 445,000 but that number is still consistent with an economy losing jobs.

Please consider the Unemployment Weekly Claims Report for October 7, 2010.

In the week ending Oct. 2, the advance figure for seasonally adjusted initial claims was 445,000, a decrease of 11,000 from the previous week's revised figure of 456,000. The 4-week moving average was 455,750, a decrease of 3,000 from the previous week's revised average of 458,750.

Unemployment Claims



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



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 2007



No Lasting Improvement for 10 Months

There has been no lasting improvement for nearly 10 months.

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.

With census effects nearly played out, It may be quite some time before we weekly claims drop to 400,000 or net hiring that exceeds +250,000.

Want to know why some businesses aren't hiring? Please consider Creating Jobs Carries a Punishing Price

Where To From Here?

The 4-week moving average has ticked down for a few weeks but the number is nothing to crow about. Moreover, claims have been generally in 450,000 range for 10 straight months of sideways movement so we can easily see more of the same. I am still expecting lots of state cutbacks so that could have an impact. Finally, the holiday shopping season is now just around the corner. It will be interesting to see what that portends.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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