A Close Look At U.S. Jobless Claims

The Unemployment Insurance Weekly Claims Report was released this morning for last week. The 323,000 new claims number was a 9,000 decrease from the previous week's 332,000 (an upward revision from 331,000). The less volatile and closely watched four-week moving average, which is usually a better indicator of the trend, fell by 3000 to 328,500, the lowest level since October 2007.

Here is the opening of the official statement from the Department of Labor:

In the week ending August 31, the advance figure for seasonally adjusted initial claims was 323,000, a decrease of 9,000 from the previous week's revised figure of 332,000. The 4-week moving average was 328,500, a decrease of 3,000 from the previous week's revised average of 331,500.

The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending August 24, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending August 24 was 2,951,000, a decrease of 43,000 from the preceding week's revised level of 2,994,000. The 4-week moving average was 2,979,500, a decrease of 18,000 from the preceding week's revised average of 2,997,500.

Today's seasonally adjusted number came in well below the Investing.com forecast of 330K.

Here is a close look at the data over the past few years (with a callout for the past year), which gives a clearer sense of the overall trend in relation to the last recession and the trend in recent weeks.

As we can see, there's a good bit of volatility in this indicator, which is why the 4-week moving average (the highlighted number) is a more useful number than the weekly data. Here is the complete data series.

Occasionally I see articles critical of seasonal adjustment, especially when the non-adjusted number better suits the author's bias. But a comparison of these two charts clearly shows extreme volatility of the non-adjusted data, and the four-week MA gives an indication of the recurring pattern of seasonal change in the second chart (note, for example, those regular January spikes).

Because of the extreme volatility of the non-adjusted weekly data, a 52-week moving average gives a better sense of the secular trends. I've now added a linear regression through the data. We can see that this metric continues to fall below the long-term trend stretching back to 1968.

A Four-Year Comparison
Here is an overlay of the past three calendar years and the beginning of 2013 using the 4-week moving average. The purpose is to show the relative annual slope of improvement since the peak in the spring of 2009. The latest year was off to an excellent start. It then oscillated a bit, stalled for about nine weeks, but since the July 9th report, the trend has been in the right direction.

For an analysis of unemployment claims as a percent of the labor force, see my recent commentary What Do Weekly Unemployment Claims Tell us About Recession Risk? Here is a snapshot from that analysis.

For a broader view of unemployment, see the latest update in my monthly series Unemployment and the Market Since 1948.