New Jobless Claims: 4-Week Moving Average At A 7-Year Low

Here is the opening statement from the Department of Labor:

In the week ending May 31, the advance figure for seasonally adjusted initial claims was 312,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised up by 4,000 from 300,000 to 304,000. The 4-week moving average was 310,250, a decrease of 2,250 from the previous week's revised average. This is the lowest level for this average since June 2, 2007 when it was 307,500. The previous week's average was revised up by 1,000 from 311,500 to 312,500. 

There were no special factors impacting this week's initial claims. [See full report]

Today's seasonally adjusted number at 312K was slightly above the Investing.com forecast of 310K. However, the less volatile four-week moving average is the lowest since early June 2, 2007 -- virtually a seven-year low.

Here is a close look at the data over the past few years (with a callout for the past year), which gives a clearer sense of the overall trend in relation to the last recession and the volatility in recent months.

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As we can see, there's a good bit of volatility in this indicator, which is why the 4-week moving average (the highlighted number) is a more useful number than the weekly data. Here is the complete data series.

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Occasionally I see articles critical of seasonal adjustment, especially when the non-adjusted number better suits the author's bias. But a comparison of these two charts clearly shows extreme volatility of the non-adjusted data, and the 4-week MA gives an indication of the recurring pattern of seasonal change in the second chart (note, for example, those regular January spikes).

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Because of the extreme volatility of the non-adjusted weekly data, a 52-week moving average gives a better sense of the secular trends. I've added a linear regression through the data. We can see that this metric continued to fall below the long-term trend stretching back to 1968.

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A Four-Year Comparison

Here is a calendar-year overlay since 2009 using the 4-week moving average. The purpose is to show the relative annual slopes since the peak in the spring of 2009. Last year (blue line at the bottom) hit a trough at the end of September. It then zigzagged higher to the end of the year. In 2014 this metric was relatively flat for the first two months, but it has trended lower since the end of February. Six weeks ago, this indicator hit its lowest level since October 6, 2007 -- two months before the start of the last recession. The trend then reversed for three weeks and remained relatively flat. But the last two data points have been new interim lows. The latest is the lowest since early June 2007.

For an analysis of unemployment claims as a percent of the labor force, see my recent commentaryWhat Do Weekly Unemployment Claims Tell us About Recession Risk? Here is a snapshot from that analysis.

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