Weekly Unemployment Claims: A Perspective on Volatility

The Department of Labor issues an Unemployment Insurance Weekly Claims Report, which also includes a 4-week moving average:

In the week ending Nov. 13, the advance figure for seasonally adjusted initial claims was 439,000, an increase of 2,000 from the previous week’s revised figure of 437,000. The 4-week moving average was 443,000, a decrease of 4,000 from the previous week’s revised average of 447,000.

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

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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The Bureau of Labor Statistics provides an overview on seasonal adjustment here (scroll down about half way down). For more specific insight into the adjustment method, check out the BLS Seasonal Adjustment Files and Documentation.

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

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