Schork: Initial Jobless Claims—Welcome to the New Normal
Yesterday’s initial jobless claims number came to 452K, slightly below analyst expectations of 455K. This is good news.
On the other hand, the prior week’s 462K initial release was revised higher to 475K. This is bad news.
At this point, however, it’s barely news at all. As illustrated in today’s issue of The Schork Report, the trend for initial jobless claims is effectively flat. There is a slight decreasing gradient, but it accounts for only 19 fewer claims a week. Not 19K claims, 19 claims.
We began the year at 456K claims, and currently stand at 452K, a 0.87% change. Over the same time, the Dow Jones Industrial Average has risen 6.89%, industrial production has risen 3.00%, retail sales have risen 3.51% and the price of NYMEX WTI has risen 1.73%.
There are two conclusions here.
First, the initial jobless claims data is relevant, and suggests that we are no better off today than we were at the start of the year. Or second, that initial jobless claims is destined to hover around this level while the rest of the economy increases disproportionately.
We believe it is the latter.
On an inter-month basis, the correlation between initial jobless claims and retail sales has fallen from a mild 0.404 at the start of 2004 to -0.096 as of today, suggesting that people are spending despite their employment status. On an inter-week basis, the correlation between jobless claims and retail gasoline prices has weakened from -0.887 in the 2009 to -0.336 today, suggesting that prices at the pump will increase regardless of claims.
At this point, we no longer ascribe a high level of relevance to the weekly claims. One explanation could be an increase of ‘grey market’ jobs which are paid but not reported. Another possibility would be that we have become more efficient as an economy and can produce more with less. Either way, expect initial jobless claims seem to fluctuate around the 450K mark for the foreseeable future.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.