Comments on: Are jobless claims peaking?

By: The Fake Recovery - Credit Writedowns

The Fake Recovery - Credit Writedowns — Wed, 03 Feb 2010 14:37:44 +0000

[...] of note.Jobless claims have plateaued and comparisons to last year are actually declining (see post).The U.S. trade deficit is declining significantly as U.S. import demand has fallen off a [...]

By: Jobless indicator: Is the recession ending? | csmonitor.com

Jobless indicator: Is the recession ending? | csmonitor.com — Fri, 08 May 2009 11:58:31 +0000

[...] the recession. (Thanks to Edward Harrison of the Credit Writedowns blog for reporting on this here, here, and [...]

By: Edward Harrison

Edward Harrison — Tue, 14 Apr 2009 10:55:52 +0000

Thanks for the message, fyego. What I generally have looked for is a substantial enough rise in unemployment statistics to warrant a pull-back in consumer spending or to presage a fall-off in production. I don’t use the two-year period that you look at because it is too much of lag to measure that change I am looking for.

So I look at 1-year or 6-month comparisons. I have started to use only 1-year -week average NSA data because it is not distorted by seasonality. Yes, these 2nd derivative comparisons capture both the rise/fall today as well as the rise/fall of the comparison data — but that is what I am looking for: an appreciable change in a short enough period of time that would indicate a large swing in economic activity.

So, even if we saw a rise in 2008 from 2007, a further rise in 2009 must still be sizeable enough to demonstrate a large swing in economic activity from 2008 to 2009.

By: fyego

fyego — Tue, 14 Apr 2009 04:07:57 +0000

There is only one problem in the YOY analysis. Last year the YOY claims was already rising – that is 2008 was showing greater losses as compared to 2007. So what you need to do is look at 2009 compared to 2007 – i.e. year over 2 years. I keep track of this data. There is too much statistical noise in week to week data – but if you use a 4 week average of the 2 year change, you’ll see that the rate of increased losses has plateaued for 2 and a half months at around 320,000 per week. There has been no drop off.

The drop off you are seeing is the rise in losses in 2008…

By: Edward Harrison

Edward Harrison — Thu, 02 Apr 2009 20:12:24 +0000

right. if you go back to my posts: look at the ones tagged jobless claims:

http://www.creditwritedowns.com/tag/jobless-claims

I’m sure you’ll see me hemming and hawing about where the data is headed. To my mind it was clear that we were in recession by that time, but how severe it would become was not readily apparent.

Just looking at an Aug 28th post, I said:

“U.S. jobless claims for the past week were down to 425,000 from 435,000 last week and as high as 457,000 three weeks ago. While seasonality is big part of the data in August, this is a comforting change from the recent pattern.
Nevertheless, comparisons to August last year remain worryingly high; Claims are sill running at 115k over last year’s figures. Meanwhile continuing claim rolls, averaging over 3.3 million the past 4 weeks, are over 800,000 above this time last August.
After Labor Day, we should look to see if these year-on-year comparisons improve to know whether we are out of the woods yet.”

And remember, many people were still denying that we were even in recession! Lehman put an end to that notion.

By: Antoine

Antoine — Thu, 02 Apr 2009 20:06:51 +0000

looking to your graph above, we can see a small decrease in Q308

By: Edward Harrison

Edward Harrison — Thu, 02 Apr 2009 19:53:28 +0000

I intend to write more on this later but I am seeing evidence that we are getting a massive inventory correction here. I had mentioned in an earlier post that inventory builds meant that Q1 GDP was going to be ugly. But it looks like businesses are going to town on this meaning that we could really see some favourable numbers by Q4.

So, combine this with the potential peak in employment, tax cuts, fiscal stimulus, quantitative easing, yada yada.. and you have the makings of a recovery. How possible is this recovery? I’d give it a healthy 25-30% probability by Q4.

Also, I see the M2M rule change as negative long-term but bullish short-term because it eliminates some of the writedowns I saw being necessary. This could mean lending will increase if the Geithner plan purges some assets from balance sheets.

Mind you, all of this is cyclical and I don’t like the optics or transfer of burden from banks to taxpayers. But, it is coming together nicely and I think that is one reason stocks are rallying.

As for the Q308 type effect, what was that exactly? And also, the correlation, I didn’t get that one either.

By: Antoine

Antoine — Thu, 02 Apr 2009 19:45:16 +0000

Interesting Edward – question, what probability do you assign on a 1. peak in change 2. another Q308 type effect ? Any idea if this is the same type of correlation in other countries ?

By: jg

jg — Thu, 02 Apr 2009 16:07:02 +0000

Very nice analysis correlating recession stop date with peaking claims in UI.

Me, I think the fundamental driver for consumption (and, ultimately, initial claims for UI) is household debt-to-GDP (or DPI). Until we see household deleverage, consumption will continue its downward movement (it peaked in Nov. ‘07) and initial claims for UI will continue their upward movement.