Initial Weekly Unemployment Claims (4-Week Moving Average) thru Week Ending February 2, 2013 – Easy Trends

In this article, I’ll do an “Easy Trends” analysis of the initial weekly unemployment claims data.  “Easy Trends” is a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest unemployment claims trend analysis for more info.

Quick ‘n Easy

By tracking the number of people who are filing for unemployment benefits for the first time each week, we get a quick insight into the latest status of the economy’s health.  Fewer claims equals more jobs, which equals more income, which usually equals more consumer spending (70% of the economy!) that supports company profits, which in turn can lead to more hiring.

First, a nice summary about Initial Weekly Unemployment Claims and why they matter, from Econoday: (note: “jobless claims” are the same as unemployment claims)

Jobless claims are an easy way to gauge the strength of the job market.  The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy.  Nearly every job comes with an income that gives a household spending power.  Spending greases the wheels of the economy and keeps it growing, so a stronger job market generates a healthier economy.

Here’s a chart showing the last ten years of the four-week moving average for weekly jobless claims from the Federal Reserve Bank of St. Louis: (may be one week old due to publishing lag from St. Louis Fed, usually if it’s still early Thursday morning)

Unemployment Claims - Initial Weekly Unemployment Claims 4-Week Moving Average Week Ending Feb 2 2013 - FRED


Unemployment Claims Trends and Projections

Below, I will discuss whether unemployment claims data is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released.

Unemployment Claims Trend Analysis

Quick ‘n Easy

The 4-week moving average (a more reliable measure that smooths things out) decreased (by 2,250) with the latest report, but we still don’t have a trend in the recent data.  That’s better than seeing a developing upward trend, and we are at a fairly low level right now in light of all the economic difficulties we’ve seen over the last few years.

Unemployment Claims - Initial Weekly Unemployment Claims 4-Week Moving Average Week Ending Feb 2 2013 - Trends

Source Data: U.S. Department of Labor

Current Trend: None – latest trend was broken as of Jan 19, and the data since then has not formed a trend with at least 50 percent confidence.

Last Confirmed Trend: (Week ending) Jan 5 – Jan 19, 2013.  During that time, initial weekly unemployment claims were falling (good) by about 7,500 per week.

Projected Next Data Point

No projection because there is no current trend.

Easy Take

With the latest report on weekly jobless claims, we have enough data to potentially form a trend, but there isn’t one there with a confidence of at least 50 percent.  There isn’t any reason to be too worried just yet.  We are at pretty low levels, relatively speaking, of unemployment claims.  So, even a flattening out here wouldn’t be too bad.  Typically, for the four-week moving average, anything under 400,000 is probably indicative of a growing labor force.  We’re below that level and should stay there for a while, keeping any talk of current recession at bay.

The latest single week’s reading of jobless claims was 5,000 lower than last week’s revised reading – coming in at 366,000 this time.  The latest single reading was lower than the one that it replaced in the 4-week moving average, causing a drop in the 4-week moving average by 2,250.  We currently don’t have a trend in the data.

Weekly initial unemployment claims is one of the most important jobs indicators because, of all the jobs-related indicators, it is the closest to being a leading indicator of any kind.  Typically, we see changes in the labor market lagging the changes that we see in the general economy, but initial weekly unemployment claims are about synchronous with the general economy.  Some argue they are slightly leading.  Even if you are worried that things might slow down in the coming weeks or months, as long as the 4-week moving average of the unemployment claims stays down below 400,000 we probably aren’t in  a recession.