Brighter Outlook on Jobs?
In a week of little news about the state of the economy, today’s weekly report on new claims for unemployment assistance comes as a nice treat: jobless claims fell 30,000 to 339,000 the lowest level since February 2008.
Coming as it does on the back of last week’s improved unemployment numbers we begin to talk credibly of a much better outlook for jobs.
Perhaps.
But before we go overboard we must note some unusual activity in this week’s figures.
There is always a bounce at the beginning of a quarter due to the way in which benefits are calculated. Many people wait, if they can, to file for a benefit because the computation is based on recent earnings over a period of a few quarters. At the onset of a new quarter an older quarter is dropped from the calculation, and if the new claimant was earning more in more recent months the consequent benefit is higher.
A second glitch in this week’s figures stems from California’s ‘forgetting’ to process some of its claims. This artificially lowered the number being accounted for. To make matters worse the seasonal adjustment factors take into account the quarterly blip I mentioned above and so the reported figures are the result of a downward smoothing. Given California’s filing error however this seasonal adjustment is working from an artificially lower base and thus is overstating the proper decline.
Given all this I think we can argue that the numbers improved, but not at the pace the report suggests. In all likelihood we will see a reversal next week and thus, as usual, we ought to focus on the four week moving average to get a sense of progress. That average, including this week’s distorted number, dropped to 364,000, which is a decent gain and fits with the overall tone in the economy of a steady, if unspectacular, recovery.