Another week of higher applications for unemployment benefits. Not a good sign at this point, considering the upward bias of late for this leading indicator. It’s premature to see today’s discouraging report as something more than noise, but it’s still hard to ignore the sight of another increase in weekly claims on the heels of the previous week’s hefty advance. The prevailing explanation among the optimists is that the numbers are distorted by seasonal volatility. That’s true… unless it’s not. For the moment, however, that narrative is the only way to look past today’s numbers and assume we’ll see better data ahead. Meantime, let’s look at today’s update and consider how the damage stacks up in historical context.
Initial jobless claims rose 10,000 last week, which follows the previous week’s huge 64,000 surge. The back-to-back increases put claims at a seasonally adjusted 379,000—the highest since March. More troubling is the second week of year-over-year increases, which hasn’t happened since Hurricane Sandy played havoc with the data in November 2012. But there’s no weather-related factor to blame this time.
Let’s not go off the deep end just yet. Keep in mind that claims data is notoriously volatile and so it’s easy to be misled by focusing on the latest data points. Tune in next week when we learn if the last two updates for this data set are deceiving us.
One reason for thinking that today’s report isn’t as ominous as it seems: the encouraging macro profile via a broad set of economic and financial indicators. As I discussed earlier today, the US economy appears to be humming along rather well at the moment, at least through November. The question is whether December will mark a turn for the worse? No, according to the initial December estimates of Markit’s manufacturing andservices surveys for the US. But today’s claims report suggests otherwise. Hmmm…
We’ll soon locate the joker in this deck. But for now, there’s a bit more uncertainty about what comes next. If the claims numbers are accurately reflecting rising distress in the labor market, we’ll see corroborating evidence in the days and weeks to come. What should we do in the meantime? The usual prescription applies: wait for more data.
This piece is cross-posted from The Capital Spectator with permission.