Thursday, March 7, 2013

A note about initial claims

- by New Deal democrat

Weekly initial unemployment claims were reported this morning at 340,000. The 4 week average of new claims fell to 348,750 - a five year low.

Both of these numbers are close to what we would expect in a "normal" expansion, which I would expect to show claims of 335,000 or less.

I'd like to point out two things.

First, yesterday the forecasting service which initially forecast a recession beginning in August, September, or October 2011, issued a new report cherry-picking data series to back up version 4.0 of their claims (that being that recession started in July 2012. Version 2.0 was recession probably starting in the first quarter of 2012, and version 3.0 was recession starting by midyear 2012). For example, twice in the last century the stock market has continued to rise through a recession (and all of the other times it peaked before or shortly after the onset of the recession). So, we were told to ignore the stock market and focus on, inter alia, money velocity, which has been declining for several years - even though for the majority of recessions since World War 2, money velocity has risen into recessions and declined thereafter.

Well, initial jobless claims have never fallen to new lows after the onset of a recession. Not even once. Ever!

Which highlights the second point, which is that sequestration probably means that initial claims are shortly going to begin to rise. It is disgraceful that Washington DC is so myopic or malicious that it is willing to risk putting the economy back into a downturn just when employment - you know, the statistic probably most important to most people - is reaching this point.