Partially updated jobless claims data suggest unemployment rate at or near top end of 2025 range

 

 - by New Deal democrat

There was no new official data reported this morning, including the normal monthly report on housing permits, starts, and construction. Yesterday the Department of Labor did partially update several weeks of jobless claims data, which helps us estimate what might happen with the unemployment rate when the September jobs report is finally released tomorrow.

Unadjusted initial claims were reported as 237,750 for the last week (a grand total of 38 claims higher than my calculation, probably reflecting the inclusion of the Virgin Islands. This translated to 232,000 as adjusted. Unadjustted continuing claims for the last two weeks were reported as 1,674,170 and 1,708,565 respectively, both of which were significantly lower than the number I was able to tabulate from the data reported by the States. This translated into 1.947 and 1.957 claims as adjusted, very close to my estimates.

In any event, although several weeks of data remain missing for now, here is what the updated graph of each looks like:

Continuing claims (right scale) are near the top of their 2025 range, while initial claims (left scale) are in roughly the middle of theirs.

Remember that initial claims are the more leading but noisier indicator for the unemployment rate, while continuing claims are closer to coincident, but carry more signal. When we compare continuing claims (right scale) with the unemployment rate through August (left scale), it suggests that in tomorrow’s report the unemployment rate is likely to be 4.2% or 4.3%:

This would be in line with the top range of the unemployment rate this year so far.

Tomorrow will be a busy day, as in addition to the delayed jobs report, we are likely to get the first timely updated jobless claims report (possibly with more back details) as well as existing home sales from the NAR.

August factory orders rebounded from early summer lows

 

 - by New Deal democrat

As with yesterday, the good news is that important official economic data is being reported again. The bad news is that it is very stale, as in covering last August.

Still, one important area that private data did not cover well during the shutdown was orders and spending on durable goods, both for manufacturers and consumers. So even if the data is stale, at least it gives us more information than we had before.

To wit, durable goods orders for August confirmed what we have been seeing in some of the manufacturing indexes, which is a slight rebound from this spring. Headline durable goods orders increased 2.9%, while total manufacturing orders increased 1.4%. Core capital goods orders (subtracting defense and aircraft) rose 0.4%:

Here is what the post-pandemic view looks like (normed to 100 as of February 2020):

And here is what the monthly change in new orders looks like (*4 for scale) compared with the more up-to-date regional Fed metrics from NY and Philly:

Finally, one marker of a recession is when sales go down, but inventories increase - because that means cutbacks in manufacturing and layoffs of employees. In August, shipments declined by a little over -0.1%, while the tiny increase in inventories rounded to unchanged:

Again, with the important caveat that this data is almost three months old, it suggests that  manufacturing found its footing after this spring’s chaotic uncertainty about tariffs, and the national trend is likely to follow the slightly improving trend we have seen from the regional data during the shutdown.

August construction spending: strong nominal headline masks neutral real trend in the deep rear view mirror

 

 - by New Deal democrat

The good news is, with the end of the government shutdown, economic data reporting resumed this morning. The bad news is, we are now in the latter part of November, and the construction spending report issued this morning was for all the way back in August. In fact, the last time I updated this information here was back at the beginning of September. So, since the information in this morning’s report is already stale, I am going to keep this brief.

When we last got information, for July, it continued the trend of declining since the summer of 2024 once we adjusted for the cost of construction materials.

In nominal terms, together with revisions, in August that reversed. For the month, total construction spending (blue in the graph below) rose 0.2%,  while residential construction spending (red, right scale) increased 0.8%, the third advance in a row for both metrics in nominal terms:

Adjusted by the cost of construction materials, however, residential construction spending declilned slightly, by less than -0.1%:

Although this is higher than readings this past spring, it looks more like stabilization than an actual turnaround - and once again, we are talking about August data, so it gives us almost no currently significant insight.

Finally, the boom in spending on building manufacturing plans continued to wane, after an explosive boom following the Biden infrastructure bill:

The August decline of -0.9% is the 10th decline in the past 12 months. While the buildout of new plants continues at a very strong pace, the trend (which is more important for the direction of the economy) is a decline.

Although the nominal headline increases are nice, I take this as no better than a neutral report

Jobless claims continue slightly elevated YoY

 

 - by New Deal democrat

Hopefully for the last time . . . As I have done since the beginning of the government shutdown, the unadjusted number of initial and continuing claims can be calculated based on reporting by the States, plus DC, and Puerto Rico. Then, by applying the same adjustment as was used for the same week last year, the seasonally adjusted number can also be estimated closely as well. This post covers initial claims for the week ending November 8, and continuing claims ending November 1.

Since my forecasting method relies on the YoY% changes, it is almost never an affected by that seasonality.  So tabulated, for the week ending November 8, unadjusted initial claims totaled 237,712 vs. 230,810 in 2024, an increase of 3.0%.  

Last year this week the seasonal multiplier was *0.94853. Applying it gives us an estimated seasonally adjusted number of 226,000.

We can similarly calculate the four week moving average, since the last four weeks of claims were 230,000, 220,000, and 225,000, as well as this week’s 226,000. That gives us an average of 225,250, which is 3,750, or 1.7% higher than the 221,500 of one year ago.

Using the same methodology, unadjusted continuing claims for the week ending November 1 totaled 1,715,989 vs. 1,647,230 last year, an increase of 4.2%.

The seasonal adjustment for the applicable week last year was *1.13645. Applying it gives us an estimate of 1.950 million continuing claims, or -4,000 lower than one week ago. Still, continuing claims throughout the government shutdown have all been close to their highest levels since 2021, which was 1.968 million this past July. 

Aside from the 2024 hurricane related distortions during October, this continues the general neutral trend that was in place before the shutdown, i.e. higher than one year ago but much less than 10% higher, forecasting a weakly expanding economy for the next several months.

Weekly Indicators for November 10 - 14 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

The trends of strong retail spending, a weak US$, and strength in commodity prices all continue. But in recent weeks withholding tax payments have waned. While there can be a number of causes for that, it definitely merits a caution flag as to job creation.

As usual, clicking over and reading will bring you up to the virtual moment at to the state of the economy, and reward me with a little lunch money for my efforts in collecting and collating it for you.

The student loan shock

 

 - by New Deal democrat

Earlier this week, I wrote about 4 current shocks to the US economy (tariffs, medical insurance increases, SNAP payments, and AI related layoffs), but I should have included a 5th as well: the effect of the end of the student loan repayment moratorium.

As a quick refresher, the Biden Administration enacted a student loan payment moratorium during COVID. That moratorium ended at the end of September 2023. As a result, monthly student loan payments rose from about $1 Billion per month to as high as $7 Billion:

Unsurprisingly, the amount of student loans in serious delinquency rose sharply, from about 1% during the moratorium to almost 15% ( ! ) in Q3 of this year:

Since student loans cannot be discharge in bankruptcy, one coping strategy is to allow other types of loans, such as credit card debt and auto loans, to go into delinquency. And that is what we have seen happen ever since the moratorium was ended:

It’s unclear if this stressor has given rise to more bankruptcies or not. Via Bankruptcy Watch, here is the weekly YoY data as of last week:

Put this together with the other shocks I described earlier this week, and it is a wonder the US was not already in recession even before the government shutdown started. It resembles very much the “austerity” program that was tried in the UK and other European countries after the Great Recession, which retarded their recoveries to a great degree.

Finally, I should note that there has been at least one very deep recession in the past caused primarily by fiscal shock; namely, the recession of 1938, which was largely due to the abrupt ending of some New Deal stimulus programs. That recession was not fully ended until World War 2-related industrial production surged.