Courtesy of Lee Adler of the Wall Street Examiner
The headline, fictional, seasonally adjusted (SA) number of initial unemployment claims for last week came in at 307,000, which was just a bit more than the Wall Street conomist crowd consensus guess of 302,000. The pundits had upped their guesses after missing on the low side last week. This was a virtual bullseye in the game of pin the tail on the fictitious number.
My interest is in the actual, unmanipulated data. Analyzing that is the only way to be sure that you are seeing what’s really going on.
The Department of Labor prominently reports the actual unadjusted data clearly and illustrates it in comparison with the previous year. As it does with virtually all government economic data releases, the mainstream financial media crowd chooses to ignore reality by not reporting the actual number. In the case of this report, the DoL also reports exactly how messy the seasonally adjusted data is by reporting what the seasonal adjustment had forecast based on the arbitrary mathematical calculation of what’s normal.
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 380,934 in the week ending
January 17, a decrease of 148,530 (or -28.1 percent) from the previous week. The seasonal factors had expected a decrease of 135,931 (or -25.7 percent) from the previous week. There were 416,116 initial claims in the comparable week in 2014.”
Initial Claims and Annual Rate of Change
The actual week to week change last week was a drop of 149,000 (rounded). This is near on the 10 year average decrease for that week, which was a decrease of 156,000 (rounded). Interestingly, this year’s drop was larger than the comparable weeks of 2014 and 2013 which fell by 119,000 and 121,000 respectively. However, the previous week’s performance was worse than the prior two years. This appears to be calendar factors at work rather than any material strengthening of the economy.
Actual first time claims were 8.5% lower than the same week a year ago.This is within the normal range, which since 2010 years has mostly fluctuated between -5% and -15%. There’s no news here yet.
In the oil patch states, Louisiana, Texas, North Dakota, and Alaska had unusually large increases in claims. That’s a trend that bears watching. There will be ripple effects. The question is how large they will be.
I track the daily real time Federal Withholding Tax data in the Wall Street Examiner Professional Edition. Like the claims data, it rebounded over the past week. The growth rate of withholding taxes had dropped sharply in December. In real terms collections dropped from an annual growth rate of around 5% in early December to 0.5% by early January. That reversed in the past week with a strong uptick in collections versus the same period last year. I will be posting an in depth analysis of that data later today in the Professional Edition.
While we have been teased with signs of change in the claims data from time to time, the trend is still in force. Only if we start to see the numbers coming in above the comparable week for the past year for a few weeks would it be a sign of material change in trend, and a possible excuse for the Fed to bring back the Ghost of QE Past.
I have been reporting that claims were at record bubble levels since September 2013. At the tops of the last two bubbles in 1999-2000 and in 2006-07 claims persisted at record low levels for a year before the economy plunged. The economic foundations were already beginning to crumble by the time the first anniversary of record readings rolled around. In other words, employers were either slow to get the message or slow to act. In the current market, the claims numbers stayed at record lows from September 2013 until December 2014. The extreme condition persisted for 16 months.This week they were slightly below record levels for this date but still at levels associated with bubble tops.
I have inverted the scale on the chart below to show the correlation with stock prices. The rate of improvement clearly slowed in 2013 and 2014 concurrent with the massive surge in Fed QE. The rate of improvement in claims was much stronger in 2012 when the Fed was not doing QE. While the direction of the stock market is positively correlated with QE, since 2012, improvement in the job market has been negatively correlated.
Claims and Stock Prices
