Economists Surprised Again by Unemployment Claims Number, but Why?

As long as that trend is intact, there will be no reason to ever expect the weekly number to mean anything other than steady-as-she-goes at the current rate. In fact, there's really little point to forecasting the number on a weekly basis, because typically a big change one way, one week is reversed the following week. What counts is the trend, which is another reason why some on Wall Street are so fond of repeating, "The trend is your friend."

It's nice that the claims number is a weekly number, and it is virtually real-time with a lag of less than a week, therefore the first sign of a change in the trend of the economy may well come from this series. It is worth watching from that respect.

At this point there's no sign of a change in the trend. There's no sign of deterioration, and certainly no sign of improvement over what's been going on, so the fact that the number was a surprise to economists is neither here nor there. The number was completely consistent with the trend.

The actual number of first-time claims last week was 397,810. This is based on the data from each of the 50 states on actual applications that is fed into the Federal Department of Labor's computers. It's not a survey or an estimate unlike many government series. It's a real number, which the government reports, but which it also then manipulates into a smooth line for economists to get excited about. This number will be revised next week, but the week to week revisions are typically small and usually just a matter of housekeeping.

This week's number is a decline of 24,477 from last week, which is absolutely typical for the first reading in February, and it represents a decline of 9.7% from the same week last year. The 52-week rate of change on this chart shows that this rate of change has been very stable in the 10% range, with occasional outliers that have been quickly reversed.

It seems to me that the big surprise is that any economists were surprised. But then, knowing how great they can be at forecasting, it's really not that shocking.

The important thing is that until this rate of change moves toward zero on a persistent basis, or to more than a 10% rate of decline, there would be no evidence of a change in the slow expansion of the US economy. Meanwhile, the mainstream media will go on surveying the economists every week, and the numbers will surprise or not surprise every other week, like clockwork.

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