Eleven weeks after setting a cycle high of 674,000, initial claims were last put at 608,000, for a cumulative pullback of -66,000. As this chartshows, that cumulative loss to date (bold yellow line) is consistent with what has been seen in other economic recoveries. However, it is on the low side of what might be expected.
As my second chart shows, last week's large decline in initial claims (week #22 in chart) was associated with a seasonal factor that anticipated a relatively large Not Seasonally Adjusted (NSA) increase. That pattern (SA decline) is likely to be repeated in weeks #26 and #27, when large NSA increases are also expected. If those data come in as expected, large seasonally adjusted increases will be expected in weeks #28 and #29, when large NSA declines are expected.
Net, if initial claims are still trending downward in mid-August, a major hurdle will have been cleared in using initial claims as an indicator that the recession is over. Till then, seasonal adjustments will make claims difficult to interpret.
On the inflation/deflation front, the latest data from the PPI and CPI are consistent with my concern that a contracting national wage bill poses a major deflation threat. Even if the rate of job losses is slowing, very low utilization rates point to very sluggish growth/stagnation in average hourly earnings, which is more important for core inflation than swings in gasoline prices.
Switching gears...In preparation for next week's data on new and existing home sales, I provide two additional charts (chart 3 and chart 4). They show how sales have performed in past recoveries, and what they look like now. The current "recovery" is bold yellow.
Mark Serlin is the Chief Economist at Economic Strategies Inc. Prior to joining Economic Strategies, Mr. Serlin authored the widely distributed SERLINON economic indicator analysis service for Bridge Information Services. Mr. Serlin has also worked in the research departments of Bear Stearns, Ried Thunberg, and Manufacturers Hanover.
Comments
The housing charts certainly show the result of excessive speculation in that market.
Could the lower than expected unemployment claims be related to this recession being the result of a credit crisis vs. a overheated economy? Perhaps we were very productive.
I am watching the rate of change in unemployment and industrial production as a guide to how the stock market may behave. So far it seems most analogous to the 1975 period. (If that persists I expect to see some still existing Dow 10K hats donned prior to yearend.) Comparing the historical unemployment information I noticed that only the two most recent recessions exhibited a peak about 18 months after the peak in the rate of change. That is much longer than the previous recessions. If for whatever reason that occurs again this time it also suggests a sluggish recovery with subdued core inflation.