Jobless claims continue to show a sideways to an upward trend

Jobless claims continue to show a sideways to an upward trend

New jobless claims declined this week, but are still significantly above their recent pandemic lows, while continuing claims, seasonally adjusted, made a new pandemic low. The downward trend in claims has clearly ended for now, although whether the current trend is sideways or upward remains unclear. In particular, there is a sizable but by no means certain likelihood that December’s jobs number will be negative.

On an unadjusted basis, new jobless claims declined by 71,512 to 869,398. Seasonally adjusted claims also declined by 89,000 to 803,000. The 4-week moving average rose by 4,000 to 818,250. All of these are above their recent lows. 

Here is the close up since the end of July (for comparison, remember that these numbers were in the range of 5 to 7 million at their worst in early April): 

Figure 1

Because of the huge distortions caused by the pandemic in seasonally adjusted numbers, and because we are at a time of year when seasonality causes the most distortions, in any event, let’s also take a look at the YoY changes in all of the above metrics:

There is now a 6-week trend in the seasonally adjusted data of YoY% increases, while the trend looks sideways for the unadjusted data. It remains likely that the renewed explosion of the pandemic has indeed caused new jobless claims to break into an upward trend due to the rampaging pandemic.

Nevertheless, as I have written for the past 2 weeks, I won’t feel certain unless and until seasonally adjusted new claims rise over 900,000 and the 4 week average over 850,000, which would take both out of the range they have been in over the past 4 months. We’re not quite there yet.

Seasonally adjusted continuing claims, which historically lag initial claims typically by a few weeks to several months, declined by 170,000 to a new pandemic low of 5,337,000. On an unadjusted basis, they declined by 5,552 to 5,444,281, about 200,000 above their recent pandemic low:

Because these lag initial claims, I continue to suspect we will see an upward reversal in the next few weeks.

Additionally, although I won’t bother with a graph, both initial and continued claims remain at or above their worst levels from the Great Recession.

Finally, in the past month the 4 week moving average of new jobless claims has been  about 75,000 higher than it was in the 4 prior weeks. In “normal” times in the past, that has typically meant an actual job loss being reported in the next month’s payrolls report. As I wrote last week, because we are in uncharted territory all I really feel comfortable saying is that I suspect that the December jobs report is going to be the weakest since May.  A negative number is very possible, and if there is a positive number, it looks likely to be well under 200,000.  

The next 8 weeks are likely to be the very worst of the entire pandemic, because it is raging completely out of control, because it is winter, and because the current Administration has absolutely zero interest in doing anything about it. It will probably take at least a month for the Biden Administration’s efforts to begin to make a difference, and there won’t be enough people vaccinated until the end of the winter for that to make a significant difference.