The media and stock market are insane. This is why. Today, AP reported the stock market, seemingly on a daily 500 point roller coaster, increased due to initial weekly unemployment claims. Don't they realize every week, the previous week is almost always revised upward?
Initial weekly unemployment claims decreased to 395,000, a reported drop of 7,000. Yet, last week was revised upward 2,000 from 400,000 to 402,000. Why anyone would get so excited with an initial claims still close to 400,000 and a 4 week moving average above 400,000, now at 405,000, is beyond me. A weekly average above 400,000 does not indicate job growth.
Initial claims is a volatile number and one must at minimum, look at the 4 week average to ascertain any sort of pattern. One week of better news does not an improving job market make.
The magic number to show job creation is at minimum, below 400,000 initial unemployment claims, per week. Most Economists will quote 375,000 as the magic number to indicate job growth.
Below is the mathematical log of initial weekly unemployment claims, so one can get a better sense of the rise and fall of the numbers. A log helps remove some statistical noise, it's kind of an averaging. As we can see we have a step rise during the height of the recession, but then a leveling, not a similar decline....for a long period. Instead, we have this yo-yo bobblehead, hovering around 400,000 every week on initial claims, never ending labor malaise for most of the time after the recession ended in July 2009. Now, notice the tail or the right of the graph, it appears an upward slope, an increase in initial claims, which started to emerge in February.
Below is the 4 week moving average, set to a logarithmic scale to remove even more statistical noise, for the last year. Again, we need the 4 week moving average to stay below 400,000 and keep dropping. Numerous economists say the number is 375,000 to show any job growth. We need this number to keep dropping, steadily.
Below is the 4 week moving average, set to a log scale, from April 1st, 2007. We are nowhere near pre-recession initial weekly unemployment claims levels.
So, while today's report was an improvement over recent months, one can see the graph slope is not accelerating and is still above even earlier this year! See any blow out job growth earlier this year? See any 375,000 initial claims averages since the start of the recession?
Even worse, the press completely ignored the trade deficit, which had strong implications that Q2 GDP growth will be revised significantly downward. Since when is GDP < 1% a reason to cheer and rock the stock market DOW 500 points?
Continuing unemployment claims dropped but bear in mind people can plain being running out of benefits.
The advance seasonally adjusted insured unemployment rate was 2.9 percent for the week ending July 30, a 0.1 percentage point decrease from the prior week's unrevised rate of 3.0 percent.
The advance number for seasonally adjusted insured unemployment during the week ending July 30 was 3,688,000, a decrease of 60,000 from the preceding week's revised level of 3,748,000. The 4-week moving average was 3,718,750, a decrease of 15,250 from the preceding week's revised average of 3,734,000.
In the week ending July 23rd, not seasonally adjusted, the raw number was 7,479,915 official people obtaining some sort of unemployment insurance benefit.