Yesterday I mentioned I was concerned with initial unemployment claims. After a period continuing improvement, claims have moved sideways/slightly higher. Here is a chart of the data.
Let's take a deeper look at this statistic.
First, note the boxed area which indicates that a reading below ~350,000 is the sign of an economy in the middle of an expansion. Therefore, we're already about 130,000 above that level. Also note the last time we saw this number over 600,000 was in the early 1980s.
After that recession (the early 1980s) , it took about a little over a year to get below the 400,000 level. Let's compare that to the current environment:
The number has been decreasing for a little under a year and we're a bit below the 480,000 -- about 80,000 above the 400,000 level. In other words the pace of improvement is behind the pace of the 1983 expansion. In comparison,
The pace of recovery of the 1990s and 2000s recession shows that job losses stayed above the 400,000 level for at least a year, yet the recovery continued.
In other words, initial jobless claims above 400,000 is not fatal to a recovery. But, a continuing period over 400,000 is probably confirmation of a "jobless" recovery. This is consistent with where job losses are occurring -- over 70% of total job losses are in manufacturing (where automation is replacing employees) and construction (thanks to the housing correction). In short, there is little reason to see strong improvement in the areas where we've seen massive job losses.
3 comments:
If you look at all the recessions on that chart there seems to be at least one stall in initial claims after coming out of the recession. You could call this our stall but only if it does not last too long.
I think if you made the scale of you claims charts for 1982 and 2009 the same, then the pattern would look remarakbly similar. 1982 had 2 pauses in the improvement trend similar to the recent pause (also at the upper 400k range) seen in the claims data. The data so far clearly looks more like 1982 than 1991 or 2001.
Also, I think your reference to automation sounds like rationalization to me. Was there really a wave of automation in 2008? Or is it just the the building of houses and cars froze up? And given household formation and auto depreciation, isn't it possible that demand kicks in again?
Very significant data! The key here is that the initial unemployment claims are not heading for zero but a number around 400,000. We are not far from there now. We are in a doom and gloom mood as a country right now. This is the period when fortunes are made (and lost). Technology stocks are trading at all time lows relative to their earninings and they have very little debt to worry about!
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