Jobless claims negative trend reversal likely; expect a poor December jobs number

Jobless claims negative trend reversal likely; expect a poor December jobs number

This week new jobless claims rose further from their recent pandemic lows, while continuing claims, seasonally adjusted, made a new pandemic low. Nevertheless, I strongly suspect the downward trend has broken.

On an unadjusted basis, new jobless claims declined by 21,335 to 935,138. Seasonally adjusted claims, on the other hand, rose by 23,000 to 885,000. The 4-week moving average also rose by 34,250 to 812,500, the highest reading in over a month. 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):

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 5 week trend of increasing YoY comparisons of the weekly data, and the 4 week average also looks like it has started a trend higher YoY. Thus it is very 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 wrote last week, 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.

The “good” news was that continuing claims, which historically lag initial claims typically by a few weeks to several months, fell by 312,257 to 5,492,701 on an unadjusted bases, and also declined by 273,000 to 5,508,000 after seasonal adjustment, a new pandemic low:

Because these lag initial claims, I strongly 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, the increase in new jobless claims has averaged 72,000 in the past 4 weeks. Here’s what that looks like vs. monthly job gains or losses this year (note that the 2 week change in jobless claims is inverted so that an increase shows as a downward bar:

I mention this because such a dramatic increase in jobless claims over a month has never occurred outside of a recession, and has always coincided with a *loss* of jobs in the monthly report:

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.  
Additionally, I also suspect the unemployment claims situation is going to continue to worsen as long as the pandemic does. I have no idea how much worse it will get.