EconoMonitor

The Wilder View

Today’s initial unemployment claims report not totally unexpected!

From CNNMoney.com, Jobless claims in surprise decline on December 4:

The number of Americans filing new unemployment insurance claims decreased last week, but the number of people continuing to collect benefits hit a 26-year high. The Labor Department reported Thursday that initial filings for state jobless benefits decreased by 21,000 to 509,000 for the week ended Nov. 29. That was down from a revised 530,000 claims in the prior week. Economists were expecting jobless claims to increase to 540,000, according to a consensus compiled by Briefing.com.

Well obviously nobody believed the Gallup Poll, This Week’s Jobless Claims Report May Surprise, written on December 2:

Contrary to the consensus estimate of economists’ expectations, Gallup’s hiring measure shows U.S. employees’ perceptions of the job situation at their companies improved a little last week. This suggests that Thursday’s Labor Department report of first-time unemployment claims for the week ending Nov. 29 may well have increased less than the 529,000 reported last week — in the opposite direction of the consensus estimate increase to 540,000.

One week’s worth of data certainly doesn’t indicate a trend in initial claims. It is better to look at the four-week moving average, which is high but not 1982 high. This is an extremely weak labor market that will certainly put downward pressure on labor income, further restricting private consumption and aggregate growth.

claims_chart.PNG

To beat the 1982 record, the four-week moving average (currently 524,500) must exceed 674,250. Unfortunately, with the following headlines from the same website (CNNMoney) and all published within one day of each other, this labor market is likely to rival 1982:

United plans to furlough 1,088 workers Credit Suisse cuts 5,300 jobs worldwide Job cuts mount as year-end nears

Initial claims fell this week, but it is very unlikely that they aims have reached a peak. Claims will rise further.


Originally published at the News N Economics blog and reproduced here with the author’s permission.

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