For reasons we’ve mentioned before, we don’t frequently write about the US initial weekly claims number — it’s too noisy, frequently is revised later, and it isn’t adjusted for changes in the percentage of the eligible jobless who actually apply for unemployment insurance (the “take-up rate”).
But we’ll make an exception for this week’s number because of tomorrow’s employment report, and because it was the highest claims reading in eight months:
In the week ending April 30, the advance figure for seasonally adjusted initial claims was 474,000, an increase of 43,000 from the previous week’s revised figure of 431,000. The 4-week moving average was 431,250, an increase of 22,250 from the previous week’s revised average of 409,000.
MarketWatch cites a Labor Department official saying this was due to a one-time round of layoffs “in the auto sector and in the state of New York, where workers in the educational field such as bus drivers are eligible for compensation during the week of spring break.”
RQD Economics sounds a few notes of skepticism:
The Labor Department again cited some technical issues boosting initial claims; this time it was i) auto plant shutdowns resulting from the disaster in Japan, ii) a new emergency unemployment benefits program in Oregon, and iii) a spring break holiday in New York, none of which were accounted for in the seasonal adjustment factors. Despite the assertion of the multiple special factors accounting for the rise in claims, we have to view the rise in the four-week average of claims as a cautionary signal on the labor market, which raises the stakes on tomorrow’s jobs report. If the special factors explanation is correct, next week’s report should show a sharp drop in claims (and we will get the state-by-state breakdown of these initial claims data next week so we will be able to see the extent to which claims rose in Oregon and New York). If initial claims don’t fall, then the Labor Department’s explanations for the rise in claims will look questionable.
Stone Street Advisors has more.
And as CR writes, the number was already steadily climbing in recent weeks. Combined with the consensus-underperforming ADP jobs report (focused on the private sector) earlier this week, there are increasing signs that the labour market has softened.
That shouldn’t be much of a surprise.
In our review of the Q1 GDP data, we mentioned that many analysts suspected the disappointing result was due to temporary factors. There were some relatively hopeful signs in the details to suggest that things weren’t as bad as the headline number: business and consumer spending could have been a lot worse, and the decline in public-sector investment accounted for much of the drag.
But overall the report indicated that aside from manufacturing, even those parts of the economy that outperformed expectations had still slowed their pace of improvement from the fourth quarter of last year.
It’s only one indicator of several that should be closely watched. The employment report is obviously another, and it has steadily improved in recent months. Nothing like what you would hope for at this stage in a recovery, but nonetheless getting better. But now it seems that consensus expectations for the April employment report is that it too has slowed its pace of improvement, and will fall short of the March numbers (185,000 vs 216,000 in March).
To put these indicators into a bigger context, here’s the latest update of the US component of the Citigroup Surprise Economic Indicators Index, which is calculated daily to reflect how economic indicators have performed against consensus expectations during the prior three months:
We last checked the index in mid-March, when it seemed as if it had hit an inflection point (which unfortunately turned out to be true).
At the time we cited an analysis of the index by JP Morgan Asset Management, which said that its recent decline meant either that “the actual macro data have deteriorated, or that expectations have risen sharply with the result that the outturns have disappointed.”
Now we know the answer.
Related links:
Claims-ian economics – FT Alphaville
The surprise party is over – FT Alphaville