The weekly number of initial jobless claims has been one of the most consistently bullish indicators recently, leading economists to believe that the U.S. economy really might be turning around.
But Nomura analysts Lewis Alexander and Jeffrey Greenberg throw sand on the fire in a note out this morning, explaining that these big beats are in fact based on inadequate seasonal adjustments by the Department of labour.
Sure, initial claims are still way below peaks reached as a consequence of the financial crisis, but nonetheless appear to be moving in a general pattern on a year-to-year basis.
Photo: Nomura Securities Inc.
That leads Alexander and Greenberg to conclude:
We expect the US economy to continue to grow at a modest pace in the coming months, but a lesson from the past few years of jobless claims data, as illustrated in Figure 1, is that the February decline should not be expected to persist. And, while our analysis indicates that February-March seasonally adjusted claims are understated, it also suggests overstating in early January. As such, the undistorted trend likely lies between the extremes, closer to 370-380k. However, should jobless claims stay near 350k into April and May, this would be indicative of a downtrend (that would exist without the seasonal bias). In the coming months, a 20-30k reversal should be interpreted as jobless claims neither improving nor worsening (although we highlight the reduced utility of using jobless claims to predict other labour market indicators in the current recovery.