Thursday, October 15, 2009

Beware BLS Santa Claus Unemployment Positive Gift Data

The most recent unemployment numbers, announced today, show some improvement in that jobless claims hit 514,000, the lowest level since early January. But these are BLS seasonally adjusted numbers. Behind the scenes something else may be brewing.

Edward Harrison is more bullish on the overall economy than I am, but he has some decent observations on on what is going on:
My baseline scenario to date sees this improvement continuing to where initial jobless claims fall back into the mid-400s by year end so that non-farm payrolls show job gains late this quarter or early next quarter.

However, this past week saw two negative data points pop into the picture. When looking at the non-seasonally adjusted (NSA) data, the number of initial claims spiked up above 500,000 for the first time in 11 weeks. This is the normal seasonal pattern and is to be expected; however, last week’s spike caused comparisons to last year in (4-week average NSA) initial claims to tick up (42K more initial claims than last year versus 36K more the week before). Translation: initial claims are not coming down fast enough to rule out a double dip recession.
The BLS seasonal factor will continue to shave the real unemployment numbers, thus they are likely to look good.

Seasonal adjustments on jobless claims data will be cut through January. That means the BLS will adjust for more layoffs due to seasonal patterns. As Harrison notes, the week ending December 5th is when the adjustment factor hits a whopping 140.2. The BLS will lop off 40,200.and report only 100,000 Thus, the key will be to watch the nsa numbers relative to the same time last year, rather than hocus pocus seasonal adjustment numbers out of BLS.

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