We reported last week that Hiring Demand was poised for upward trending. Reductions in new weekly unemployment insurance claims, as announced this morning by the Department of Labor, support this interpretation.
On a seasonally adjusted basis:
- Initial claims dropped by 47,000 new claims to 522,000.
- The 4-week moving average of new claims dropped by 22,500, a substantial drop. This is the third drop in a row, and the second "substantial" drop in the 4-week moving average. Recall that the National Bureau of Economic Research usually signals the start of an economic recovery 8 weeks after the peak in the moving average of weekly unemployment claims.
On a seasonally unadjusted basis:
- Initial claims jumped, as expected (from seasonal coefficients) and presaged by a substantial drop in weekly new job ads last week. Indeed, weekly new job ads had dropped by 120,000 new ads to 635,000.
The graph below shows the historical relationship between new job ads, posted on a weekly basis, and seasonally unadjusted new UI claims. The UI Claims axes has been inverted to facilitate interpretation – as the number of new job ads falls, businesses cannot support new employees, and more workers are forced to register unemployment insurance claims.
Click chart to view full size
There has been talk that the "timing" of automotive factory closing is causing an artificial drop in the weekly unemployment insurance claims. However, slowing drops in total employment, improvements in UI claims data, and Hiring Demand that is inching its way back up to consistent month-over-month growth all point to a stabilizing situation, with the start of a recovery "just a matter of time".
All Entries