The Department of Labor announced this morning that new UI claims fell by only 1,000 last week, settling to 530,000 once seasonally adjusted. Based on the number of new job ads we saw over the past two weeks, we had predicted a stable to improving UI report.
On a seasonally unadjusted basis, the number of new UI claims rose by 32,00 claimants, even as the number of online job ads rose slightly by 2,000 ads. However, this is probably due to the drop of 32,000 that we saw two weeks ago.
The relationship between new UI claims and the level of online job ads is quite strong: the correlation between the two variables has been -0.70 over the past four years. As more job ads are posted online, more people can find work, and fewer must file for unemployment insurance – hence the negative sign on the correlation coefficient. What’s more, the correlation increases to -0.76 when we examine the one week lagged value of online job ads, which supports the hypothesis that Hiring Demand leads published measures of labor market dynamics. The second lag stays strong at -0.72 as well. The UI Claims axes has been inverted on the graph below to facilitate interpretation.
Click chart to view full size
What can we expect from next week's UI Claims report? The number of online job ads rose by 2,000 last week and again by 31,000 this week, settling to 371,000. The multiplicative seasonal correction factor is moving from 92.9 to 93.8, which is almost no change at all. The influx of new job ads should drive the seasonally unadjusted UI claims count downwards. With a fixed seasonal correction factor, new Unemployment Insurance Claims should fall again.
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