New Unemployment Insurance Claims rose by 11,000 in this week's Department of Labor Report. Employers missed their usual January rendez-vous with job seekers – Hiring Demand fell by 7% or 15,000 new online job ads** last week on a seasonally adjusted basis. Employers can make it up next week, however.
December and January employment data is highly volatile in terms of seasonal fluctuations. Job ads usually drop heavily during Christmas-time and then pop back up in January.
What's more, there's something we call "the January bounce" – not only does January Hiring Demand come back from the Holiday slump, it usually jumps above previous December levels. New budgets are usually the source of this "January Bounce" – there's a sort of pent-up demand for labor that's waiting for a new budget cycle to kick in.
During the last week of December, UI Claims benefited from a smaller than expected seasonal dip in Hiring Demand (UI claims improved by 22,000). This week, however, UI Claims suffered from a smaller than expected January rebound in Hiring Demand.
The two tables below show historical December/January seasonal fluctuations, compared to what we've seen so far this year.
Whereas we expected Hiring Demand to drop around 28.2% at the end of December because of the Holidays, it in fact dropped only 19.7% – this is what drove new UI claims down by 22,000 new claims. We were expecting a 24.8% jump in Hiring Demand this week, yet we only saw a 21% jump – and UI claims rose 11,000. (We label the UI claims as "Improvements" in the table below : a negative sign in front of UI changes is actually a good thing, as there are fewer unemployed, so the sign has been flipped momentarily to facilitate interpretation…). It could be that the current economic climate "dampens" seasonal movements. The good news is that over the past couple weeks we've still seen a net improvement of 11,000 new UI Claims (22,000 for last week minus 11,000 for this week's release). (The bounce in 2008 was a little bit more spread around. The difficulty in seasonally adjusting weekly data is were "how exactly" a holiday falls matters greatly. January 1st falling on a Friday has a different effect than if January 1st fell on a Wednesday, for example – that entire week may have to be discounted more heavily in terms of seasonal adjustments).
Table : December/January Hiring Demand Seasonal Movements
Source: WANTED Analytics data
In 2006 and 2007, Hiring Demand rebounded by over 55% in the first two weeks of January. January 2008 was the start of the recession, so the bounce was less pronounced at 51.7%. For 2009, the financial crisis had just struck, and we saw a measly bounce of 35.2% . We'd need a jump of over 30% for the second week of January this year to compensate for last week's soft rebound. This is possible, but we're more likely to see something around 25%.
Table : January Hiring Demand Rebound, Historical
Source: WANTED Analytics data
Below is a 4-year Hiring Demand time-series, where a small horizontal hash has been inserted to show the break between the first and second week of January. This coming week will be a clear signal of how businesses will hire in 2010, as new budgets are rolled out and hiring activity finds its way to online job boards.
Source: WANTED Analytics
(**: WANTED Analytics is a highly flexible data querying tool. The sites which are used to construct Hiring Demand Indicators can change, depending on, for example, significant price changes for a job board. If a job board drops its price by 50%, the rise in online job ads isn't macroeconomic, rather it's a price-elasticity response to cheaper advertising. Such modifications were carried out for this week's analysis, and the time-series graph above is not directly comparable to those seen in previous posts).
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