Initial jobless claims dropped below 200,000 last week for the first time since January, and not too far from the 50+ year low of 182,000 set in September one year ago. Specifically, they declined from -13,000 to 198,000. The four-week average declined -1,000 to 205,750, the lowest since February. Contrarily, with the usual one-week lag, continuing claims rose 29,000 to 1.734 million:

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I had surmised that there was unresolved seasonality in a similar decline this year in September as last year. But last year claims started rising steadily in October. Not so this year! If so, it could mean that the strengthening in the short leading data we saw this spring and summer has fed into more coincident data, as perhaps suggested by the big September increase of over 300,000 in employment. We’ll see.

For forecasting purposes, the YoY% changes are more important, and here, for the first time in over half a year, one measure was not higher. Weekly claims are exactly even with where they were one year ago. The more important four-week average is up 5.0%. Only continuing claims continue in very negative territory, up 28.8%:

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Since continuing claims lag a little, I expect them to reverse lower in the coming weeks.

Finally, since initial claims have a 50+ year history of leading the unemployment rate, the improvement in initial claims YoY averaged for the first three reports of October is up +2.5%. This suggests that the unemployment rate in the next few months may steady in the 3.7%-3.8% range (3.65%*1.025 = 3.75%):

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This week was unadulterated good news. I’ll take it.

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