Jobless Claims up with a vengeance

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A week ago, jobless claims rose to a multi-year high of 448,000 on the back of seasonal adjustments. This week is no different, but there are some telling changes that make this week’s numbers more worrisome.

First, jobless claims hit a six-year high of 455,000 for the week, sending the 4-week average initial claims above 400,000 for the first time since 2003, a clear recessionary indicator. But, this week is marred by seasonal adjustments just as last week was.


In the data below notice that the actual claims figure is 74,000 lower than the headline seasonally-adjusted figure. This is how this week is identical to last week.

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The difference is in the year-to-year comparisons of actual claims. While, a one-time aberration in a seasonally-adjusted figure can be misleading, a year-on-year comparison of 4-week average claims is not misleading.

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Notice how the year-on-year 4-week average claims comparison is now spiking up with the ACTUAL claims now 110,000 higher than at this time last year. This puts the comparison to last year up over 65K in a span of only 4 weeks. With the stimulus package effect well and truly over, this type of data is very bearish in terms of future consumer spending. If this trend holds, expect to see a negative GDP number in Q3 regardless of the deflator.

Continuing claims are also trending up in comparison to a year ago. The average continuing claim number is up 650K over last year’s.

While I called last week’s number misleading, this week’s number is anything but misleading. It is downright ugly. Let’s see how the trend progresses over the next few weeks.

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