Beware! Jobless Claims Fall By 30,000, Continuing 10 Month String Of Record Lows

With yesterday’s 4% GDP print it’s becoming clear that the observation I had reported for several months that the US economy is overheated in key areas is starting to creep into mainstream consciousness.

When you pay attention to actual data, it’s easy to see the facts of what is happening on the ground well before mainstream economists and the Washington-Wall Street self congratulatory echo chamber of mainstream media press release repeaters. The clueless herd religiously follows the dumbed down seasonally adjusted headline numbers rather than actual data. Is it any wonder that they usually have no idea what’s actually happening in the US economy?

Today’s report on initial jobless claims continues the pattern of extreme readings that we’ve had our eyes on for 10 months. It set another record low for this week of the year, continuing a string of record lows that began in September of last year.

Another report released this morning suggested rising wage pressures, although that is probably skewed by the narrow segments of the labor market where skills are in short supply. Those wages are rising faster, but in the bulk of the economy where specialized skills are not required, wages are likely to remain stagnant because there’s still a massive pool of low skilled labor looking for work. As companies continue to cut workers, the oversupply of labor persists, lowering the market value of labor. These conditions are symptomatic of just how distorted the US economy is, thanks to the Fed’s QE and ZIRP, which reward speculation and financial manipulation at the expense of savings and real investment.

Today, the headline, seasonally adjusted (not actual) number for initial unemployment claims for the week ended July 26 was 302,000. That was 8,000 less than the consensus guess of Wall Street economists. The actual numbers, which the Wall Street captured media ignores, again show claims below the levels reached at the top of the housing/credit bubble in 2006. Since September 2013 when the number of claims first fell to a record low, the data has suggested that the central bank driven financial engineering/credit bubble has reached a dangerous juncture.

The actual number for this week is also below the number reached just before the top of the internet/tech bubble in 1999. That’s both in relative terms as a percentage of the workforce, and in absolute numbers. As a percentage of the workforce it’s less than the late July 2000 reading as well.

The headline number is seasonally adjusted (SA), therefore fictional. It may or may not give an accurate impression of reality, depending on the week.

Until the last several weeks, mainstream media press release repeaters, thanks to their focus on the SA imaginary numbers, have given little indication that by historical standards the numbers represented a danger sign. That has now changed. Ten months after the fact, the headline writers have  finally recognized the record levels, but the Wall Street Washington self congratulatory media echo chamber has presented that as positive, rather than the danger sign that it is.

The media repeaters are also incorrectly reporting that the numbers rose last week. In fact they fell, as they always do in the 4th week of July, but they fell less than usual. In the distorted world of mainstream economic press release repeaters, that’s an increase.

Here are the actual numbers.

According to the Department of Labor, “The advance number of actual initial claims under state programs, unadjusted, totaled 257,210 in the week ending July 26, a decrease of 29,839 (or -10.4 percent) from the previous week. The seasonal factors had expected a decrease of 49,885 (or -17.4 percent) from the previous week. There were 281,692 initial claims in the comparable week in 2013. ”

Actual initial unemployment claims were 8.7% lower than the same week a year ago. The normal range of the annual rate of change the past 3.5 years has mostly fluctuated between -5% and -15%. The current number is a continuation of the bubble trend.

The actual week to week change last week was a decrease of nearly 30,000. Decreases are normal for this week of July. The current number is not as strong as the average change for this week of a decline of 61,000. The comparable week last year saw a drop of 59,000. It will be a few weeks before we learn if this slippage is a sign that the worm is turning, or just a one week wonder.

New claims were 1,840 per million workers in June nonfarm payrolls. This compares with 1,965 per million in this week of 2007, which was when the housing bubble was on the verge of collapse, and 1,909 per million in the comparable week of 2006, right at the top of the bubble. In September 2013, this figure set a record low. In each ensuing week the numbers have remained at or near record levels. The current number is also less than the number hit during the same week of 2000 just before the tech bubble collapsed.

With record readings having persisted for 10 months, let’s just say that the actual numbers have given us fair warning that the Fed sponsored financial engineering bubble may not have much longer before it too begins to deflate. The numbers persisted at extreme levels at the tops of the last two bubbles for a year before the collapses got rolling. The foundations were already beginning to crumble by the time the first anniversary of record readings rolled around. We’re almost at that stage today.