Jobless Claims Off The Charts As Bubble Sectors Hoard Workers

The headline, fictional, seasonally adjusted (SA) number of initial unemployment claims for last week came in at 276,000. The Wall Street economist crowd consensus guess was 280,000.

Rather than play the expectations game on the seasonally manipulated headline number, we focus on the actual trend based on the actual data. Actual claims were 230,055, which is another record low for this calendar week. Not only that, but it marked the lowest number of claims per million of non-farm payroll workers, ever, in history.

Employers in some bubble sectors are hoarding workers. Similar behavior in the past has been associated with bubbles, and has led to massive retrenchment, usually within 18 months or so.

In the current case, the actual weekly totals first set an all time record low in September 2013. That trend has continued since then, with each weak either being at or near record levels for that week each year. In the housing bubble similar behavior continued well beyond the peak of that bubble in 2005-06. Employers seem to take their cues from stock prices, and not vice versa.

The Department of Labor (DoL) reports the unmanipulated numbers that state unemployment offices actually count and report to the DoL each week. This week it said, “The advance number of actual initial claims under state programs, unadjusted, totaled 230,055 in the week ending May 30, a decrease of 23,399 (or -9.2 percent) from the previous week. The seasonal factors had expected a decrease of 17,029 (or -6.7 percent) from the previous week. There were 264,133 initial claims in the comparable week in 2014.”

Initial Claims and Annual Rate of Change 

The last week of May is a swing week, with claims sometimes up, sometimes down. The actual change this week was a decrease of -23,000 (rounded). That compared with a decline of -11,000 for that week last year and the 10 year average for that week of -4,000 (rounded). Week to week changes are noisy. What’s important is that trend remains on track.

In terms of the trend, actual claims were 12.9% lower than the same week a year ago. Since 2010 the annual change rate has mostly fluctuated between -5% and -15%. This week’s data was within that range. There’s no sign of an uptick in the trend of firings and layoffs.

There were 1,626 claims per million of nonfarm payroll employees in the current week. This was not only a record low for that week, well below the 2007 previous record of 1,934, it was the lowest number ever recorded for any week historically. The 2007 extreme occurred just a few months before the carnage of mass layoffs that was to begin later that year. Employers were still clueless that the bubble had ended and that that would have devastating effects.

Because employers apparently tend to take their cues from stock prices, we cannot depend on this data for advance warning of a decline in stock prices, although there should at least be concurrent confirmation.

Initial Claims Inverted and Stock Prices 

We have noted before in these updates that the oil price collapse may be analogous to the housing bubble peak in 2006. The impact of the oil price collapse started to show up in state claims data in the November-January period. While most states show the level of initial claims well below the levels of a year ago, in the oil producing states of Texas, North Dakota, Louisiana, and Oklahoma, claims have been above year ago levels since the turn of the year. North Dakota and Louisiana claims first increased above the year ago level in November of last year. Texas reversed in late January. Oklahoma joined the wake shortly after that.

In the most current state data, for the May 23 week, claims were up in Texas by 5.4% year to year, (vs. +0.4% in the previous week), Louisiana +6% (vs. +18%), and North Dakota +64% (vs. +117%). Oklahoma was up by 23% (vs. +26%). There’s been wide variance in these numbers week to week but the trend of claims being significantly higher than the same week last year has been persistent. Texas, with a huge and somewhat more diversified economy has improved since April but is still showing more claims than last year.

In the May 23 week, 19 states had more claims than in the same week in 2014. That was up from 10 the prior week, and 13 in the May 9 week. This number fluctuates widely week to week with many states near even. At the end of the third quarter of 2014 just 5 states showed an increase in claims year to year. At the end of 2014 that had increased to 8. In early April this year the number had risen to 22.

The 22 states that were higher in early April gives us a benchmark to watch, similar to an advance decline line in the stock market. If the number of states showing a year to year increase in claims should exceed 22, it should be an indication that the trend is beginning to reverse. That could be an advance warning of a big stock market decline as well.

I track the daily real time Federal Withholding Tax data in the Wall Street Examiner Professional Edition. The year to year growth rate in withholding taxes in real time is now running +7.2% in nominal terms. This is up from +5.9% a month ago. The May 12 week was the reference week for the May payrolls survey. The numbers for that week support the likelihood of a gain in May payrolls similar to April’s .

The claims data shows no sign yet of any cooling in this financial engineering bubble economy. This will continue to encourage the Fed to engage in the charade of pretending to raise interest rates sooner rather than later. The real problems will start when the Fed finds that in order to get rates up, and keep them up, it will need to begin shrinking its balance sheet. I cover that subject in depth in your weekly Money-Liquidity Pro.