Thursday, January 05, 2012

Jobless Claims End 2011 at 3.5 Year Low; And ADP Reports 325K Private Job Gain in December

In another sign that the U.S. labor market is gradually improving, the Labor Department reported today that the four-week moving average for initial jobless claims fell to 380,250, the lowest level since June 2008, three and-a-half years ago (see chart above).  This marks the fifth consecutive decline in the four-week moving average, and the ninth decline in the last ten weeks.  

In a separate report today, paycheck processer ADP reported that U.S. nonfarm private employment increased by 325,000 in December, another sign that the labor market was gaining momentum as the year ended. This was the largest monthly employment gain in a year, and almost twice the median consensus expectation of a 178,000 gain.

According to Joel Prakken, Chairman of Macroeconomic Advisers, who is quoted in ADP's press release,  "Today’s report, which is notably above the consensus forecasts both for today’s number and for Friday’s jobs estimate from the BLS,points towards a strengthening labor market.  Today’s report also suggests that November’s somewhat surprising decline in the unemployment rate might stick and, indeed, that the unemployment rate could fall further in December. Other indicators also signal some firming of labor market conditions, including the downward trend in unemployment claims, upturns in consumer sentiment and confidence influenced by perceptions about the availability of jobs, along with a rising trend in employees voluntarily quitting their positions."

Update: See Scott Grannis's post and graphs highlighting the good news on the labor front today. 


At 1/05/2012 11:53 AM, Blogger Benjamin Cole said...

Happy for the mild good news; but remember that 63 percent of the USA population was employed prior to the Great Bu$h Recession, and now only 58 percent are.

That represents a huge loss in output, profits, wages and true national security.

Obama, Congress and the Fed are dithering fools.

At 1/05/2012 12:07 PM, Blogger VangelV said...

Sorry Mark but I have to go with Benji on this one. After you look at the participation rate as low as it is, with the massive liquidity injections, huge deficits, and seasonal factors it is hard to make a case for a sustained recovery in employment. Perhaps the government can keep the balls up in the air past the next election but it is looking dire for the long term.

At 1/05/2012 12:27 PM, Blogger juandos said...

"Jobless Claims End 2011 at 3.5 Year Low; And ADP Reports 325K Private Job Gain in December"...

Well if Ike Brannon and Mike Thoman writing in the American (American Enterprise Institute's online magazine) seem to think different: Why Unemployment Is Worse Than You Think

The current unemployment rate of 8.6 percent hides the extent of the economic crisis. The widely quoted rate misses not only the under-employed and discouraged workers, but also major demographic factors...

At 1/05/2012 12:37 PM, Blogger morganovich said...

another factor that seems to need to be included here are the number of people on unemployment.

initial claims is only one part of the story.

the more folks on the dole (now for very long periods of time) the lower the pool who could even file for initial claims. instead of getting a couple months of benefits, getting a job, getting fired, and claiming again, they just stay on the dole the whole time and are counted once.

an initial claim for 96 weeks of benefits is not the same as one for 26 weeks.

i suspect that the longer benefits period has depressed the initial claims figure substantially.

At 1/05/2012 1:39 PM, Blogger juandos said...

From Gallup: U.S. Job Creation Unchanged in December

At 1/05/2012 1:47 PM, Blogger bart said...

Another inconvenient fact and a whopper of an anomaly - 'total claiming benefits' was in the ~6.7mm range since September, but starting week ending 11/26, its been around 7.2mmm with a high of 7.45mm.

The picture is far from peachy keen.

At 1/05/2012 2:01 PM, Blogger morganovich said...

one more issue worth keeping an eye on:

seasonal adjustments seem to be playing a really major role, and can wind up distorting figures.

the SA IC number was 372.

the raw number was 535, 44% higher. that's a huge variance and a big source of potential error.

last month's variance was only 28%.

on a raw number basis, initial claims actually went up for the week of dec 31 to 535 from 497 the week before.

i don't really know how to handicap the seasonality of the 3rd week in dec to the 4th, but for the SA variance to essentially double in one week and drive the reported number in the opposite direction of the raw data would require a pretty convincing explanation.

there may well be one, but i certainly have not heard it.

raw data here:

At 1/05/2012 2:05 PM, Blogger morganovich said...

This comment has been removed by the author.

At 1/05/2012 2:18 PM, Blogger morganovich said...


seasonal adjustment variance was 15% for the week of dec 17th, (421 vs 366) giving us a further uptrend in the raw data and a big swelling in the impact of seasonal adjustment which basically tripled in impact in 2 weeks.

i am sure that there is a big seasonal layoff of christmas workers every year, but as many were short term seasonal workers anyway, i'm not sure they qualify for UI benefits and it would seem that earlier in the month, the seasonal adjustment should have gone the other way (taking the raw data up, not down) and it didn't.

i think we are going to need to see a few cleaner weeks of data before trying to read too much into this. the Dec figures are a mess.

At 1/05/2012 3:22 PM, Blogger Ron said...

I used to agree with those who state that the participation rate indicates a bad employment situation until I read an article about it on the Calculating Risk blog. Basically, he made the point that the participation rate would have declined even if we didn't have the '08 financial/housing crash due to demographic issues, mainly people retiring and female labor involvement maxing out. I think this needs to be kept in mind.

At 1/05/2012 3:46 PM, Blogger morganovich said...


while there are certainly some demographic issues at play with the e/p ratio, a 5% point swing in a couple months was not driven by demographics. that's simply far too wide a swing.

look at the speed of the fall.

also note that the % had been in an uptrend from 2003-7 and reverse as recession hit.

while there is surely a demographic issue in the data as a whole (and one that may affect recovery), that drop was caused by recession.

the notion that so many boomers all retired at once just as they lost all their savings seems implausible.

At 1/06/2012 3:38 PM, Blogger Ron said...

Good points. Thanks for the refutation.


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