Jumat, 14 September 2012

Update: Major Trends in New Jobless Claims

Today, we're updating our ongoing statistical analysis of the major trends in the weekly number of new jobless benefit claims in the U.S. since the end of 2005.

The big change is that since our last major update in April 2012, we've seen the end of one primary trend, gone through another, and have now started a third. Goodbye Trend I. Sayonara Trend J. Hello, Trend K!

Primary Trends in Seasonally-Adjusted Initial Unemployment Insurance Claims, 7 January 2006 - 8 September 2012

The table below summarizes each of the periods identified with letters of the alphabet in our updated chart showing each of the major trends over the period from January 2006 through the present:

Timing and Events of Major Shifts in Layoffs of U.S. Employees
Period Starting Date Ending Date Likely Event(s) Triggering New Trend (Occurs 2 to 3 Weeks Prior to New Trend Taking Effect)
A 7 January 2006 22 April 2006 This period of time marks a short term event in which layoff activity briefly dipped as the U.S. housing bubble reached its peak. Builders kept their employees busy as they raced to "beat the clock" to capitalize on high housing demand and prices.
B 29 April 2006 17 November 2007 The calm before the storm. U.S. layoff activity is remarkably stable as solid economic growth is recorded during this period, even though the housing and credit bubbles have begun their deflation phase.
C 24 November 2007 26 July 2008 Federal Reserve acts to slash interest rates for the first time in 4 1/2 years as it begins to respond to the growing housing and credit crisis, which coincides with a spike in the TED spread. Negative change in future outlook for economy leads U.S. businesses to begin increasing the rate of layoffs on a small scale, as the beginning of a recession looms in the month ahead.
D 2 August 2008 21 March 2009 Oil prices spike toward inflation-adjusted all-time highs (over $140 per barrel in 2008 U.S. dollars.) Negative change in future outlook for economy leads businesses to sharply accelerate the rate of employee layoffs.
E 28 March 2009 7 November 2009 Stock market bottoms as future outlook for U.S. economy improves, as rate at which the U.S. economic situation is worsening stops increasing and begins to decelerate instead. U.S. businesses react to the positive change in their outlook by significantly slowing the pace of their layoffs, as the Chinese government announced how it would spend its massive economic stimulus effort, which stood to directly benefit U.S.-based exporters of capital goods and raw materials. By contrast, the U.S. stimulus effort that passed into law over a week earlier had no impact upon U.S. business employee retention decisions, as the measure was perceived to be excessively wasteful in generating new and sustainable economic activity.
F 14 November 2009 11 September 2010 Introduction of HR 3962 (Affordable Health Care for America Act) derails improving picture for employees of U.S. businesses, as the measure (and corresponding legislation introduced in the U.S. Senate) is likely to increase the costs to businesses of retaining employees in the future. Employers react to the negative change in their business outlook by slowing the rate of improvement in layoff activity.
G 18 September 2010 2 April 2011 Possible multiple causes. Political polling indicates Republican party could reasonably win both the U.S. House and Senate, preventing the Democratic party from being able to continue cramming unpopular and economically destructive legislation into law, bringing relief to distressed U.S. businesses. Fed Chairman Ben Bernanke announces Federal Reserve will act if economy worsens, potentially restoring some employer confidence. The White House announces there will be no big new stimulus plan, eliminating the possibility that more wasteful economic activity directed by the federal government would continue to crowd out the economic activity of U.S. businesses.
H 9 April 2011 26 November 2011 Rising oil and gasoline prices exceed the critical $3.50-$3.60 per gallon range (in 2011 U.S. dollars), forcing numerous small businesses to act to reduce staff to offset rising costs in order to prevent losses. The trend ends when average motor gasoline prices in the U.S. fall back below the $3.50 level in the week between 5 November 2011 and 12 November 2011 - the corresponding improvement in business outlook shows up in the data with the next full pay cycle (2-3 weeks later, or rather, the week ending 26 November 2011!)
I 3 December 2011 11 February 2012 With average gasoline prices in the U.S. having fallen below the critical $3.50 per gallon level, employers respond to the improving business outlook by reducing the number weekly layoffs at a faster rate, as both businesses and consumers benefit from lower transporation and fuel costs, while consumers gain more disposable income. Trend I ended shortly after gasoline prices rose back above the $3.50 per gallon mark in late January 2012.
J 18 February 2012 23 June 2012 With average gasoline prices continuing to be a high levels through the spring and summer, the pace of layoffs in the U.S. steadily increased until June 2012, when the national average price of gasoline in the U.S. finally dropped back below the $3.50 per gallon mark.
K 30 June 2012 Present Trend K began with a sudden shift downward in the number of new jobless claims as gasoline prices fell below the $3.50 per gallon mark in June 2012, and although the average price of gasoline in the U.S. has since risen back above that level, there has been no sudden upward shift in new jobless claims. Instead, the number of initial unemployment insurance benefit claims filed in the weeks since has been rising at a faster rate than at any time since on the onset of the 2007 recession.

We can see that faster rate of increase in our close-up view of the residual distribution of the four most recent primary trends, covering the period of time since 26 March 2011:

Residual Distribution for Seasonally-Adjusted Initial Unemployment Insurance Claims, 26 March 2011 - 8 September 2012

In determining the primary trend for Trend K, we should note that we have omitted the data for the weeks ending 7 July 2012 and 14 July 2012. Both weeks were suspected to be atypical given the delay in the timing of annual automotive industry plant holidays in 2012, which was not compensated for in the BLS' seasonal adjustments. As it happens, the data for 7 July 2012 appears to be right in line with the primary trend we determined using all the weekly data reported in the period since 21 July 2012, while the data for 14 July 2012 appears as an outlier.

We also note that the data for the most recent week ending 8 September 2012 also includes roughly 9,000 additional layoffs due to the effect of Hurricane Isaac. In the context of our statistical analysis, the effect of the hurricane appears to be consistent with typical natural variation in the data.

Finally, we observe that new jobless claims in the U.S. appear to be rising at the fastest rate recorded since the onset of the 2007 recession. As such, this measure indicates that the health of the U.S. job market is currently declining, although we continue to anticipate stronger economic growth in 2012-Q3 than occurred in 2012-Q2.

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