Comments on: Jobless claims may signal the end is near

By: Is 2009 tracking a 1930 Great Depression scenario? - Credit Writedowns

Is 2009 tracking a 1930 Great Depression scenario? - Credit Writedowns — Fri, 29 Jan 2010 14:51:32 +0000

[...] recovery at some point later this year. Robert Gordon has gone as far as to suggest we could be in recovery already – at least in the United States. I too have called for a Q4 or Q1 recovery. So, is it off to [...]

By: Is the recession dating committee preparing for a double dip? - Credit Writedowns

Thu, 21 Jan 2010 16:27:28 +0000

[...] University made statements this past Spring suggesting he sees an early recovery dating (see Jobless claims may signal the end is near from April 2009). But Martin Feldstein, another NBER dating committee member, is holding out. He [...]

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

Jobless indicator: Is the recession ending? | csmonitor.com — Fri, 08 May 2009 19:24:38 +0000

[...] Here’s the record: Going back to the mid-1970s, the four-week average of initial claims for jobless benefits has always peaked about a month before the end of the recession. (Thanks to Edward Harrison of the Credit Writedowns blog for reporting on this here, here, and here.) [...]

By: Economic recovery and the perverse math of GDP reporting - Credit Writedowns

Economic recovery and the perverse math of GDP reporting - Credit Writedowns — Thu, 07 May 2009 18:29:58 +0000

[...] week, I posted an article he wrote suggesting that the recession is about to end (See my post “Jobless claims may signal the end is near”). Apparently, he thinks recovery may be [...]

By: Edward Harrison

Edward Harrison — Fri, 01 May 2009 19:37:30 +0000

No problem, Jake. I may not even need to post because of this post over at VoxEU: Green shoot or dead twig: Can unemployment claims predict the end of the American recession?

I may still at my contribution, but this is a good post by them on the issue.

By: Edward Harrison

Edward Harrison — Fri, 01 May 2009 15:37:30 +0000

By: jake

jake — Fri, 01 May 2009 04:26:47 +0000

definitely post / send me that graph...

if this is beating a dead horse, my apologies, BUT

initial claims are ONLY new jobless claims filed by individuals seeking to receive state jobless benefits, thus only those people that have been fired.

continuing claims take into account those people that have already been fired for at least a week and continue to receive state jobless benefits.

thus, if firms are firing people less, but hiring by a smaller amount than that... continuing claims can rise even though initial claims fall

By: Edward Harrison

Edward Harrison — Thu, 30 Apr 2009 22:12:03 +0000

But, isn't that always the case in a recovery (or a fake recovery a-la 1981). I mean, at the end of the cycle, firms are not hiring so the claims numbers pile up. But at some point, they stop firing people at the same clip. So, while continuing claims and the unemployment rate are still increasing, initial claims are not.

I am still of the view that watching the unemployment rate is a losing proposition if you want to make any money on the turn. By the time unemployment turns down, the rally is either over or well underway. And the same goes for businesses looking to gauge future plans. Waiting is going to cost you money.

I'll have to do that graph to show you what I mean.

By: jake

jake — Thu, 30 Apr 2009 21:57:31 +0000

i agree the rate is lagging, while the change is leading. however, if the number of people laid off is > than the number of people rehired into the workforce, the rate will continue to rise.

in numbers terms, if the number of people laid off drops from 630,000 to 500,000 (a substantial drop), the unemployment rate can still grow if any of the following two things happen (all else equal):

i) the population is growing
ii) the number of people rehired + fall out of the workforce < 500,000

By: frcreditrepair

frcreditrepair — Thu, 30 Apr 2009 17:12:45 +0000

You are correct, the jobless claim numbers are the important ones to watch. They have been on the rise for far too long.

By: Edward Harrison

Edward Harrison — Thu, 30 Apr 2009 17:01:53 +0000

jake, later today or tomorrow, if I have the time, I will post the claims serious versus recession. What one is going to see is a peak in initial claims before recession ends and a peak in continuing claims after claims end. Continuing claims is analogous to the unemployment rate and initial claims is analogous to the change in that rate.

And the change in the unemployment rate is also a leading indicator while the rate itself is lagging:
http://www.creditwritedowns.com/2008/09/chart-o...

So, if this pattern still holds (i.e. that companies continue to cut workers even after the bottom has been reached) then we should expect continuing claims to continue up.

I would be pretty suspicious, though if continuing claims kept rising for more than two months. So, by mid-summer, the trend should be clear.

By: jake

jake — Thu, 30 Apr 2009 16:46:47 +0000

Ed- I can understand why the 4-week moving average for initial claims was historically a leading indicator of an economic bottom, but doesn't that need to correspond with the hiring of those that had previously been laid off? In other words, the total # of unemployed is what is relevant and while that has historically correlated with initial claims, it has diverged this go around…

This time things are different…

http://4.bp.blogspot.com/_pMscxxELHEg/Sfmd3anrX...

Those individuals alrady unemployed, have remained unemployed FAR longer than past cycles, hence the reason why continuing claims continues to grow (even while initial claims flatten). Until that reverses, even with a decrease in initial claims, unemployment rates will rise…