An Unexpected Jump in New Jobless Claims

November 26, 2014

by Doug Short

Here is the opening statement from the Department of Labor:

In the week ending November 22, the advance figure for seasonally adjusted initial claims was 313,000, an increase of 21,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 291,000 to 292,000. The 4-week moving average was 294,000, an increase of 6,250 from the previous week's revised average. The previous week's average was revised up by 250 from 287,500 to 287,750.

There were no special factors impacting this week's initial claims.
[See full report]

Today's seasonally adjusted number at 313K was substantially above the Investing.com forecast of 287K. The four-week moving average at 294K is now 15K above its 14-year interim low set three weeks ago. The 21K new claims is the largest weekly increase since August.

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 volatility in recent months.

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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.

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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 4-week MA gives an indication of the recurring pattern of seasonal change in the second chart (note, for example, those regular January spikes).

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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 added a linear regression through the data. We can see that this metric continued to fall below the long-term trend stretching back to 1968.

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A Four-Year Comparison

Here is a calendar-year overlay since 2009 using the 4-week moving average. The purpose is to compare the annual slopes since the peak in the spring of 2009.

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.

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

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