An Unexpected Surge
There was an unexpected surge in initial unemployment claims, even as other economic data showed some improvement. Following on the heels of an extremely weak Q1 GDP report (flawed as GDP is as a measure of ‘growth’), this continued the recent streak of ‘mixed’ and seemingly incongruous economic data points. Keep in mind that this Thursday’s initial claims report was already outside the reporting period of the payrolls report that will be published on Friday.
As Lee Adler reports here, actual, unadjusted claims confirmed the surge in the seasonally adjusted number this time. Often the two data series fail to confirm each other, and as Adler frequently points out, the statistical ‘smoothing’ exercises usually only serve to obscure what is really happening. This week’s number was quite bad, which is why it is worth mentioning. According to Adler:
“The actual weekly change of an increase of 18,000 compared with the 10 year average for this week of a decline of -12,200.In this week last year the week to week change was a drop of -24,700. In that respect as well, the current reading was bad.â€
Calendar quirks (due to Good Friday) may have influenced the number, so one will need to watch for upcoming releases to see if a worsening trend is developing. What is already certain is that the unadjusted claims data have begun to diverge from the stock market.
Initial and continuing unemployment claims. These are the officially reported seasonally adjusted figures – click to enlarge.
It has been observed that the trend in initial unemployment claims and the stock market correlate very closely. Moreover, there is usually a disconnect developing between these trends both at important peaks and important lows. Here is a long term chart showing the inverse of initial claims vs. the SPX. The vertical lines are aligned with major stock market peaks and lows (the last one is obviously only aligned with the ‘high so far’, since the market may move still higher).
