Seasonally-adjusted claims below 500,000 for third week

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The weekly jobless claims figure came in at 474,000. That is up 17,000 from the previous week. Revisions of the two prior weeks put the net surge at 18,000. The 4-week average is 473,750. All numbers are seasonally-adjusted.

This latest data is the highest seasonal adjustment we have seen since the stock market improved and since a technical recovery began this summer.  The actual claims were 664,865, a large number associated with normal seasonality. Because I suspected that seasonal adjustments moving in the same direction as the jobs trend (namely down) would cause the numbers to sink, I have been waiting for this week’s number as confirmation of that trend.

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And we have seen a clear downshift from numbers in the 530’s in October to numbers now in the 470’s. That is a considerable move.  Moreover, 6-month (down 149,000) and 12-month (down 56, 750) comparisons of the 4-week average are favourable. Coupled with the relatively benign holiday season retail sales figures, this tells me that jobs picture, while poor, is improving and will continue to improve.

I am certainly less worried about job losses at this point. Nevertheless, 470,000 is a number still consistent with a slight loss on non-farm payrolls because hiring has not been robust. Going forward, I expect to see non-farm payrolls turn up in Q1 while employment creeps higher. A growing population and likely pro-cyclical increased labour force participation mean we need a +150k for the unemployment rate to remain stable.

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We are likely to see a very slow recovery in the jobs picture through to Spring.  At that point, the cuts in local and state budgets will loom larger and we can re-assess at that juncture. My baseline is for a secondary relapse, but it is much to early to know.

Note: despite 5.1 million as the official jobless role, total unadjusted jobless claims exceeded 10 million because of the extension of unemployment benefits to those who have run out of benefits. This is testament to the weak hiring environment.

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