April 23, 2009
THE PEAK STILL HOLDS
It's too soon to declare that the worst of the recession has passed, but it's also premature to dismiss the idea. We are, in short, in a never-never land of waiting and watching, and this game may roll on for many a moon.
To help pass the time, we're watching the data as it comes in, including initial jobless claims. As we've written, this is one of several metrics that may offer clues about when the business cycle reaches a trough. Like any one statistic, it can't be fully trusted, and so we must look to a range of data points. But history suggests that as single measures of broad economic trends go, this one's unusually useful in trying to peer into the future, or so it's been in the past.
With that in mind, we turn to this morning's update on new filings for jobless benefits. As the chart below shows, the encouraging drop through the week of April 11 has since given way again to the forces of darkness via last week's seasonally adjusted rise of 27,000 new filings. But the hope that we've seen a top isn't lost yet.
History suggests that initial claims will top out concurrently or perhaps even slightly ahead of the recession's formal bottoming. Yes, we must look to other signals for context before we make any definitive conclusions. For the moment, the jury's still out, but the good news is that it's not yet clear that the recession's getting worse, or so the trend in initial jobless claims suggests.
The question is whether we're due for another surge in bad news for the labor market? The economy is still too precarious to rule out the possibility. On the positive side, despite the robust rise in claims last week, the trend in the chart above still doesn't preclude the possibility that we've seen a peak. Deciding if in fact that's true will take another month or two of data. Meanwhile, evidence that we're not peaking requires only one weekly surge skyward.
Posted by jp at April 23, 2009 9:38 AM
Just another speculation about this fascinating predictor statistic, you say:
“The question is whether we're due for another surge in bad news for the labor market?”
Actually, we may already have the answer to that question with GM’s announcement of its intention to close plants over the summer. Unless, there are off setting decreases in first time claims, I should think that we will see a significant spike up.
Whatever! For those interested in economic statistics, this is the time of their life. – intellectually not financially.
Posted by: Tom Verso at April 24, 2009 8:34 AM