Initial Claims Stay At Bubble Record Lows, Is This Time Different?

Courtesy of Lee Adler of the Wall Street Examiner

The headline, fictional, seasonally adjusted number for initial unemployment claims came in at 283,000, very close to the Wall Street conomist crowd consensus guess of 285,000. That was a non event.

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. The condition has now persisted for 13 months. I have warned for months that this implied that the central bank financial engineering/credit bubble has been at a dangerous juncture. 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.

According to the Department of Labor the actual, unmanipulated numbers were as follows. “The advance number of actual initial claims under state programs, unadjusted, totaled 255,483 in the week ending October 18, a decrease of 18,260 (or -6.7 percent) from the previous week. The seasonal factors had expected a decrease of 33,552 (or -12.3 percent) from the previous week. There were 312,037 initial claims in the comparable week in 2013.”

Initial Claims and Annual Rate of Change- Click to enlarge

The actual week to week change last week was a decrease of around 18,000 which is a less than normal decline for the third week of October. The average of the prior 10 years for that week was a drop of approximately 38,500. It’s too soon to say this represents a change of trend. The previous several weeks had a much stronger than average performance. This week looks like giveback.

Actual first time claims were 18.1% lower than the same week a year ago. The normal range of the annual rate of change the past 3.5 years has mostly fluctuated between approximately -5% and -15%. Over the past 3 weeks the numbers have been at an extreme seen only a handful of times since the bungee rebound of 2010. There are no signs of weakening yet.

New claims were 1,828 per million workers counted in September nonfarm payrolls. This number is far lower than the ratio in the comparable October week 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. The current condition has persisted for 13 months. Is this time different, or just more extreme?

Initial Claims and Stock Prices- Click to enlarge