Initial Unemployment Claims Warnings Just Keep On Coming

Courtesy of Lee Adler of the Wall Street Examiner

The headline, fictional, seasonally adjusted number for initial unemployment claims came in at 264,000, thus shocking the Wall Street conomist crowd, whose consensus guess was for 290,000. Bloomberg reported that not a single conomist in their survey had guessed that the number would be that low. Even the phony numbers continue to run red hot. That has been a persistent danger sign for more than a year now, a danger sign that everyone has either misinterpreted or ignored.

The actual, not seasonally finagled numbers, which the Wall Street captured media ignores, shows claims continuing at all time record levels on the basis of claims per million workers since September 2013, when the number first fell to a record low. The condition has now persisted for 13 months. I have construed this as suggesting that the central bank financial engineering/credit bubble has been at a dangerous juncture, and have warned as such for months. The media echo chamber continues to present record lows as positive, stubbornly ignoring the historical fact that extremes like this have always led to severe market and economic contractions.

Here are the actual unmanipulated numbers and the data showing why those numbers are so troubling.

According to the Department of Labor, “The advance number of actual initial claims under state programs, unadjusted, totaled 271,590 in the week ending October 11, an increase of 14,031 (or 5.4 percent) from the previous week. The seasonal factors had expected an increase of 37,615 (or 14.6 percent) from the previous week. There were 360,957 initial claims in the comparable week in 2013.”

Initial Claims and Annual Rate of Change- Click to enlarge

Actual initial unemployment claims were a stunning 24.8% lower than the same week a year ago. That’s the second straight week the difference was at an extreme. The normal range of the annual rate of change the past 3.5 years has mostly fluctuated between approximately -5% and -15%. The current number is at an extreme seen only a handful of times since the bungee rebound of 2010. There are no signs of weakening yet. There were no external factors that would have caused this.

The actual week to week change last week was an increase of around 14,000, which is much better than normal for the first week of October. The average of the prior 10 years for that week was an increase of approximately 40,000.

New claims were 1,943 per million workers counted in September nonfarm payrolls. This number remained lower than the ratio at the top of both the housing bubble in 2006 and the internet bubble in 1999.

Initial Claims Per Million Workers- Click to enlarge

These numbers persisted at extreme levels at the tops of the last two bubbles for a year before the collapses got rolling. The foundations were already beginning to crumble by the time the first anniversary of record readings rolled around. Today’s situation is similar to those. Stocks have dipped over the past 3 weeks and some long term technical indicators have begun to flash major trend sell signals indicating that a bear market is either about to begin or has already begun.

Initial Claims and Stock Prices- Click to enlarge