Here’s what you should probably do with this week’s jobless numbers: ignore them.
Here’s what you probably will do: talk about how the “unexpected” drop to the lowest level since January indicates that the worst fears about the economy may not be coming true.
But we’re getting ahead of ourselves. Let’s go to the tape: initial claims for jobless benefits dropped 52,000 to “a seasonally adjusted” 565,000 in the week ended July 4.
Economists had expected claims to fall by only 4,000. Which pretty much shows you that economists are pretty useless for this kind of thing.
One guy who may not be useless is Abiel Reinhart, an economist at JPMorgan Chase. He recently argued that there will be 50,000 fewer workers than normal filing jobless claims in early July.
One reason the new claims was probably lower was the absolute halt in US manufacturing in the first couple of quarters of this year, especially at the automakers. They traditionally lay people off in the summer and slow down production for plant improvements, but this summer they may be trying to play a bit of catch up by producing inventory that wasn’t built in the winter and spring. And as Reinhart said, Detroit has already fired so many workers and closed so many plants that there aren’t that many autoworkers to file claims.
The typical seasonality of jobless may be throwing off the numbers. Government planners anticipate an increase in jobless claims in the summer, and so they smooth them out. This is why the official numbers are “seasonally adjusted.” So this week’s drop in seasonally adjusted claims masks an actual increase in jobless claims. We jumped from 559,894 claims at the end of June to 577,506 for the July 4th week.
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