Jobless claims drop but unemployment rolls at 25-year high
Tomorrow is the day that we get a big piece of the data puzzle for the U.S. when the unemployment report is released. Most economists are expecting something very ugly with over 200,000 jobs lost. In the interim, we might be able to use the weekly jobless claims reports to get a feel for how the data might look tomorrow.
This past week, jobless claims were 481,000, down 4,000 from the previous week and continued claims came in at more than 3.8 million. The data is consistent with recession but do not signal a significant deterioration in the employment outlook. Last week, I claimed we were in a holding pattern as the weekly data have not really shown an acceleration or deceleration in the unemployment rate.
While that is true, the announced layoffs we have seen over the last month will almost certainly push up the unemployment rate significantly in the next few months when the job cuts are actually made. The increase in continuing claims is the canary in the coalmine here.
Looking at the year-over-year comparisons, one can see the raw claims data numbers showing a slight pick up since the beginning of September while the seasonally-adjusted comparisons have been holding fairly steady. This suggests that seasonal factors are distorting the data as we enter the holiday season and are masking a potential deterioration in the employment situation. The first graph below shows year-on-year comparisons of the raw claims data rising when comparing 2008 and 2007 data. The second graph is the seasonally-adjusted claims data.
The continuing claims data was the real eye opener as it does show that people are not getting jobs. Claims were up 100,000 on both aseasonally-adjusted and a non-seasonally adjusted basis. The seasonal number, 3.843 million was the highest in 25 years and should be seen as a leading indicator of expected increases in the unemployment rate going forward. Year-on-year comparisons are now approaching a massive 1.2 million increase despite the fact that November 2007 is when the continuing claims data first started to increase. Tomorrow is the day when we get the official figures. I anticipate a large increase in the unemployment rate from 6.1% to as high as 6.5% or 6.6%.
Unemployment Insurance Weekly Claims Report – DOLETA