Thursday, January 14, 2021

Jobless claims highest in three months - but seasonality still playing a huge role


 - by New Deal democrat

On a unadjusted basis, new jobless claims rose by 231,335 to 1,151,015. Seasonally adjusted claims also rose by 181,000 to 965,000. The 4 week moving average rose by 18,250 to 834,250.

Here is the close up since the end of July (these numbers were in the range of 5 to 7 million at their worst in early April): 

There is now a 2+ month trend of YoY% increases in initial claims. Further, by rising to over 900,000, seasonally adjusted claims hit one of my two markers for a fundamental change of trend. But the 4 week average, which is still under 850,000, did not.

For the last couple of months, I have been cautioning that the holiday season plays havoc with seasonality even in normal years, let alone a year when the pandemic is causing changes in weekly numbers by an order of magnitude. That was especially so this week. Typically in the weeks after Christmas and New Years’, claims go up by 25,000 to 50,000 on an unadjusted basis. This year claims went up by up to 10x as much.

But when we look at the YoY% change in all of the above metrics, which washes out those outsized seasonal affects, the picture is not nearly so negative:

While weekly seasonally adjusted claims have risen 366% - a YoY comparison last seen in August, non-seasonally adjusted weekly claims, and the 4 week average are still in the YoY range they were in October, at +240% and +290% respectively. In fact the non-seasonal trend looks more sideways than increasing.

In other words, this was one bad week of data, but we are clearly above November lows, but nothing awful (or at least, not materially *more* awful than before) has happened yet.

Turning to seasonally and non-seasonally adjusted continuing claims, which historically lag initial claims typically by a few weeks to several months, the former rose by 199,000 to 5,271,000, and the latter rose by 474,180 to 5,856,230:

Because these lag initial claims, I have suspected that we would see an upward reversal, and it appears to have arrived.

Finally, as I usually note, a reminder that both initial and continued claims remain at or above their worst levels from the Great Recession.

Bottom line: renewed partial lockdowns and increased consumer caution due to the out of control pandemic have caused increased layoffs. Should we get another week like this one in the next couple of weeks, that will probably mark the decisive break of trend. At the same time, it isn’t quite as bad as I would have thought several months ago. Further, since I expect Biden to tackle COVID as his very first priority (even before prosecutions for the January 6 putsch attempt), hopefully we will see the worst within 4 to 8 weeks.