The Department of Labor announced an increase of 17,000 new Unemployment Insurance Claims on a seasonally adjusted basis. These now total 551,000. On a seasonally unadjusted basis, new UI claims also rose by slightly less than 6,000 – to 444,000 – even as the number of new online job ads rose by 35,000.
This week's deterioration can be explained by a 56,000 slip in postings two weeks prior. The correlation between new UI claims and new online job ads has been -0.7 over the past 4 years. The correlation between new UI claims and the one-week lagged value of new online job ads has been -0.76, which supports the hypothesis that new UI claims are a leading economic indicator. What's more, the correlation between new UI claims and the two-week lagged value of new online job ads has been -0.72, which means that a dry spell in job ads can affect UI claims as much as two weeks out. (The UI claims axes has been inverted to facilitate the analysis of this negative relationship).
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The UI claims 4-week moving average , which smooths out variability, was not adversely affected and fell from 554,250 to 548,000 new claims a week.
We expect an improving UI claims report next week. The seasonal correction factor is in play, as always, and new UI Claims would have to rise by 30,000 on a seasonally unadjusted basis to produce a rise in the seasonally adjusted level. This worsening of UI claims on a seasonally unadjusted basis would have to come despite improvements of 18,000 and 36,000 in the number of new online job ads in the past two weeks..
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