Initial Jobless Claims Can’t Improve Beyond This Critical Level

The Department of Labor’s Unemployment Insurance Weekly Claims Report was released this morning for last week. Claims dropped 14,000 from the previous week, which was revised upward by 4,000. The 4-week moving average declined by 3,000. Despite the improvement, this marks the 13th week above the 400K level after dropping below 400K for seven of the previous nine weeks. Here is the official statement from the Department of Labor:

In the week ending July 2, the advance figure for seasonally adjusted initial claims was 418,000, a decrease of 14,000 from the previous week’s revised figure of 432,000. The 4-week moving average was 424,750, a decrease of 3,000 from the previous week’s revised average of 427,750.

The advance seasonally adjusted insured unemployment rate was 2.9 percent for the week ending June 25, a decrease of 0.1 percentage point from the prior week’s revised rate of 3.0 percent.

The advance number for seasonally adjusted insured unemployment during the week ending June 25 was 3,681,000, a decrease of 43,000 from the preceding week’s revised level of 3,724,000. The 4-week moving average was 3,705,250, a decrease of 3,750 from the preceding week’s revised average of 3,709,000.

Today’s number was below the Briefing.com consensus estimate of 425,000 claims.

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

Click to View

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).

Click to View

Because of the extreme volatility of the non-adjusted weekly data, a 52-week moving average gives a better sense of the long-term trends.

weekly unemployment 52 ma

The Bureau of Labor Statistics provides an overview on seasonal adjustment here (scroll down about half way down).

Doug Short Ph.d is the author of dshort.com.

Learn More with Econ 101: Your Ultimate Cheat Sheet to Unemployment Numbers.