Ignore Today’s Data

Just a quick note to you all: please ignore today’s report on new claims for unemployment assistance. I think the big uptick is a statistical quirk, not a reflection of the realities of the demand for workers.

The report has claims jumping up to 445,000, that’s an increase of 35,000 and takes the total to a two month high. It also twists the trajectory of the four week moving average, which now shows a slight increase also. This time of year is notorious for producing oddball reports. Local government offices have shortened hours during the year end holiday season. This means that paperwork piles up unattended to, so in the next couple of weeks they end up processing a backlog. Thus we often see anomalous movements reflecting paper shuffling, not actual layoffs. The same goes for workers: there is a well known tendency for workers who want to make a claim for assistance to postpone going and doing so during the holiday weeks. Subsequently they turn up en masse, and are not truly newly unemployed in the week they make their first claim.

This is a convoluted way of saying that our natural skepticism sometimes should err on the positive side of interpretation. Today is such an occasion.

We can expect claims to trend down over the next few weeks and into the spring. Whether there was a year end hiatus in the improving trend line will only emerge once we see the next couple of week’s data. Remember: the Fed Beige book suggests that the job market has entered a new and more encouraging phase. Even though that report has anecdotal evidence in it, and is not a hard count, I think it probably a better guide to what is going on than this apparently distorted claims number.