- by New Deal democrat
Let’s take our usual weekly look at jobless claims. Why do I always do this? Because they are a very good and very timely short leading indicator with nearly a 60 year history; particularly when paired with YoY stock prices as my “quick and dirty” economic forecast.
To the numbers: last week initial claims declined -4,000 to 203,000, continuing their string of extremely low numbers, especially when compared with population growth over the last 60 years. The four week moving average increased 1,250 to 205,500, also very low historically. And continuing claims, with their typical one week delay, declined -18,000 to 1.778 million:
As per usual, it’s the YoY% changes which are more important for forecasting purposes. Let me show you why, with the long term historical YoY% changes dating back to the late 1960s:
The blue line (initial claims, averaged monthy) *always* rises and falls before the unemployment rate (red). It is simply an excellent leading indicator for the unemployment rate, with a 60 year history. Continuing claims (gold) are more coincident with the unemployment rate, but have the virtue of being less noisy.
Now here is the post-pandemic YoY look at jobless claims:
As of this morning’s report, initial claims are lower 11.4% YoY, the four week moving average down -9.9%, and continuing claims down -8.4%. These are extremely positive numbers for the economy.
Here is how initial and continuing claims YoY compare with the unemployment rate post-pandemic:
Jobless claims turned lower YoY about 6 months before the unemployment rate followed, and the suggestion is that there will be even better YoY comparisons with the unemployment rate.
Here’s the look in absolute terms:
Jobless claims are forecasting that over the next several months the unemployment rate will move even lower than its last 4.1% reading, or at worst remain steady.
And with stock prices higher 18.4% YoY (not shown), there is almost no chance of any recession in the next few month
