Thursday, January 5, 2023

New jobless claims end 2022 on a positive note; preview of tomorrow’s jobs report


 - by New Deal democrat

Initial claims started off the year - or ended last year if you are technical about it - on a positive note, declining 19,000 to a 3 month low of 204,000. The more important 4 week moving average declined 6,750 to 213,750, a two month low. Continuing claims for the prior week also declined by 24,000 to 1,694,000 (due to either a software or human entry glitch, FRED recorded the entries as December 31, 2023! Which leaves a one year gap, so I have omitted this week’s data on the graph below):

All three numbers also remained lower YoY. The most important leading indicator, the YoY% change in the 4 week moving average of new claims, is 3.2% lower than its level one year ago (due to the same glitch, this week’s data is omitted on the below graph):

Although seasonal distortions can be at their maximum right now, this is a very good weekly report.

Tomorrow we get the much more important monthly jobs report. Because initial claims lead the unemployment rate, and have remained low, I expect the unemployment rate to remain unchanged +/-0.1%. As to payrolls themselves, I expect the three month average of 272,000 to continue to slowly decline, which suggests a monthly number below 250,000. Because tax withholding came in negative YoY for the second month in a row in December, I will be on particular alert for a downside outlier compared with recent reports.

Additionally, I will be looking to see if there is deterioration in some leading employment metrics that haven’t rolled over yet; specifically construction and manufacturing employment. Since the weekly Staffing Index has also weakened in the past month, I will also be looking to see if temporary employment continues to decline.