Unusually Substantial Drop in Unemployment Claims This Time of Year

Two weeks after the end of the Holidays, unemployment claims, even when seasonally adjusted, should logically be increasing, right? They didn’t this time. In a Thursday release by the U.S. Department of Labor, the advance figure for initial unemployment claims decreased by 50,000 for the week ending January 14th.

The advance figure for that week showed 352,000 initial claims against the revised number of 402,000 for the previous week, a drop of some 12 percent. This helped the 4-week moving average of claims drop to 379,000. Putting this statistic into perspective, at the worst of the recession in early 2009, this average was around 650,000. Since 2000 the lowest the average has been was near the 275,000 mark, and the last time it was as low as 379,000 was in April 2008.

This latest number is part of an ongoing trend which has accelerated over the last few months. Typically, unemployment is the ‘lag’ variable when recessions come to an end – in English, this means that employers usually increase the workweeks of current employees first, then hire new employees when that becomes inadequate for their needs.

A report also released on Thursday shows real hourly wages for December almost flat; this gives employers a window in which to hire new people without raising pay for them or their current staff. If this is indeed what is going on, employers should enjoy it while they can – it won’t last forever.