Jack Dunn - Reclaiming Common Sense

How low can the first-time unemployment claims level fall?

The "Bottom of the Hour Breaking News" most Thursdays used to be the Seasonally Adjusted (SA) First-time Unemployment (FTU Claims number. A number under 300,000 SA FTU was considered to be an indicator of a strong economy. The Obama Administration manufactured a FACT (False Assertion Considered to be True) regarding consecutive weeks with a SA FTU under 300,000 claims. This FACT has been visited many times, most recently in the article "Economic Urban Legends." The overall trend has been downward for the past nine years. The peaks are lower and the troughs have been lower.  We had not fallen below the 200,000 Non-seasonally adjusted (NSA) FTU between September of 1973 and September of 2015. We have had multiple weeks since that time where we have recorded and NSA FTU below 200,000. This February  was the earliest that we have dropped below 200,000 NSA FTU claims. It was soundly ignored. The second component that is referenced is the SA Continuing  Claims (CC) data. The CC data trails the FTU data by one week. The NSA CC value given us some insight as to which direction the Jobs Report U-3 claims are heading. Next week we will receive the continuing claims data from the week closest to the Jobs Report data collection date. What happened this week?

Non-Seasonally Adjusted First-time Unemployment claims were recorded at 225,545. This is a drop from last week's value of 231,725. last week's advance value was 231,388. Either way this is a slight drop. Either way it is lower than the second week of April Last year. It is true that it is more comparable to the data from April 15, 2017 (225,864.) The number to watch is the NSA FTU value for the first week of May. Last year that value was 215,000 claims. It was lower than the second week of April value. This means that we may drop below the 210,000 level and possibly below the 200,000 level by this time next month. The NSA FTU value last year was under 200,000 during the third week of August. Could it drop below 173,000 claims by the first week of June?

The Seasonally Adjusted Claims number could have been reported Under 195,000 claims. The authors of the report are not making comparisons to prior lows. This is the lowest SA FTU value for this week of the year since 1969 and is lower than the original value of 257,000 April 8, 1967. If we used last year's seasonal factor it would have been reported at 222,000 and not 232,000. If we used the seasonal factor from 1998 then it would have been reported under 200,000 claims. If we are comparing data from 2018 with data from the 1960s and 1970s then we have to use the same seasonal factors. That would make a number under 195,000 the "real" SA FTU value that should have been reported. We are talking 190,000 or 192,000.

The Non-seasonally Adjusted Continuing Claims data was recorded at dropped to 1.926 Million. This is significant. Last year this value was over 2.1 million. The chart is pointing lower. Will it fall below 1.7 Million by Mid-May, just a month from now? It was 1.781 Million the first week of May last year, NSA. We dropped 250,000 claims between mid- April and Mid-May. We should continue to see a drop in continuing claims, as a general trend, through September and into October. This will be ignored by most in the media.

The Seasonally Adjusted Continuing Claims Data could have been reported much lower. The official SA CC value was reported at 1.863 million claims and didn't even receive a nod. This is an in-column, below the fold, page B-8 story. You have to search for it. If we maintain this "gap" of 200,000 to 250,000 claims a week, every week, through the first week of October we could see a value under 1.3 million claims by October and could challenge the low set during October 1973. The value of he NSA CC value for the first week of April was revised higher from its advance value of 1.994 million claims to 2.001 million claims. The take away here is that we are at the lowest level for the first week of April since April 6, 1970. The SA CC value should have been reported under 1.8 million claims and could have been reported under 1.7 million claims.

The weekly unemployment claims data is about as unloved as the scale at the gym. You work out and convert fat to muscle, and even though your clothes fit better than last week the scale could say that you are adding weight.  The scales in this case are the seasonally adjusted data. We need to re-tare the scale. The April 7 values for 2001, 2012, and 2018 are comparable to one another. They should be "identical." Last week this column published an article that detailed how the difference of one day meant the difference of a week on claims data. The seasonal factors change week to week, month to month, and year to year. The seasonal factors change between the NSA FTU data and the NSA CC value.  FACTs can be created while comparing seasonally adjusted data to seasonally adjusted data. The reality of the situation is that this data is extremely good. It is historically good when you consider that there are approximately 141 million covered insured right now and that there were roughly 53 million covered insured during the last 1960s. Sooner or later this will become bottom of the hour headline news. I don't hold out much hope for talking about it during the lunch hour.

It's the economy.