August 8, 2013
Jobless Claims Continue To Trend Lower
Filings for unemployment benefits inched higher last week, and the new five-and-a-half-year low in the previous report evaporated with a modest upward revision. As it turns out, claims for the week through July 27 only matched the previous low, established for the week through May 4, 2013. But don’t let this statistical shuffling divert you from the main takeaway: new claims continue to trend lower, which is a positive sign for the labor market and the economy.
Consider that the four-week average of claims last week dipped again, falling to a seasonally adjusted 335,000. That, by the way, is a new cyclical low for the four-week average—claims haven't navigated these levels on an average basis since November 2007.
More importantly, claims continue to fall on a year-over-year basis, a more reliable signal that minimizes short-term noise in search of the true trend. By that standard, the latest report brings another dose of good news. New filings last week dropped by more than 10% vs. the year-earlier level on an unadjusted basis. That’s a strong clue for arguing that the labor market continues to heal.
If and when claims start rising on an annual basis we’ll have a powerful reason to worry. For now, signs of distress continue to look minimal by way of this leading indicator. Lindsey Piegza, chief economist at Sterne Agee & Leach, sums it accurately when he tells Reuters: "The overall economy and the labor market are improving at a moderate pace." That’s the message across a range of indicators, and it remains the dominant theme in today’s jobless claims release.
Correction: An earlier version of this story incorrectly noted that the four-week average of claims fell to the lowest level since January 2008. In fact, claims fell to the lowest level since November 2007.
Posted by jp at August 8, 2013 10:07 AM
Weekly changes are far too noisy, in any economic environment. I agree that looking at additional employment indicators is helpful. I focus a lot on jobless claims, however, because it's updated relatively frequently, and so it provides fresh insight throughout the month... until the monthly numbers arrive. That said, I look at a mix of monthly numbers, including the ratio of the employed to unemployed, private payrolls, the index of weekly hours worked, along with a monthly average of claims. Here's a list of the key indicators overall in my modeling:
Posted by: JP at August 9, 2013 6:15 AM
Wouldn't the better plot right now to be the weekly change in the jobless claims? Seems between ijc and nfp, the number has been very stable. To realize when we have had a fundamental shift, I would think this number would show us on a control chart.
Also, what does this number look like if the ratio of Part-Time to Full-Time job creation was closer to historical norms? Normalizing this number would be interesting.
Bloomberg had a chart a few weeks ago showing the unemployment rate as a function of labor participation rate which I found insightful.
Posted by: JC at August 8, 2013 10:28 AM