Thursday, April 4, 2013

Initial claims: DON'T PANIC! ... yet

- by New Deal democrat

Initial claims were reported this morning at 385,000, far above estimates and far above what we were seeing just a few weeks ago. If this were truly "organic," it would be what I would expect to see on the cusp of a new recession.

But it may not be organic. For the last two years, we have had similar increases of about 40,000 in claims from March into April, so it may be an issue of unresolved seasonality in the reports. Here's the graph I published a couple of weeks ago on that subject:

One other thing that almost certainly is happening is that layoffs due to the US government "sequester" are now showing up and having an impact. Unfortunately since the initial claims are not broken out via type of employer, it's impossible to know today how much of the total increase is due to those layoffs. Tomorrow's March employment report should give us some information (although that report will be based on interviews conducted before mid-March, so sequestration-related layoffs will probably not even show up in full there).

If the increase is not due to hidden seasonality, but is "real," even if all due to the sequester, this would be the first big sign that continuing fiscal idiocy in Washington is dragging the economy back down towards contraction.