Schork: Initial Jobless Claims' Eternal High

Analysts were looking for initial jobless claims to drop from 424K to 417K, but once again they were left disappointed. Claims did drop, but it was to 422K, while the prior week’s 424K figure was revised higher to 428K.

As illustrated in today’s issue of The Schork Report, this marks the eleventh time in the last 12 reports that initial jobless claims have come in at or above analyst expectations. In fact, we would not be surprised to see this week’s number revised higher in the next report due to the inability to file claims on Memorial Day.

Understandably, we are concerned about the knock-on effect for today’s nonfarm payrolls data. Analysts are looking for a change of 165K, which seems disappointing after the 244K increase in payrolls seen in April. If analysts are correct, May would mark the smallest increase since January, a month which traditionally sees low hiring due to inclement weather and layoffs of temporary workers.

The problem is, analysts underestimated weekly initial jobless claims in April by a combined 154K. If their margin of error comes to 93.33% of the expected value, how reliable can expectations be?

Given weak industrial production and personal expenditure data, payrolls could see a very insignificant rise or even a decline.

We may sound gloomy, but even the crowd may not be as bullish as it seems. Analysts are also looking for the unemployment rate to drop from 9.0% to 8.9%. But if discouraged workers are returning to the economy to look for jobs (a good sign) the unemployment rate should be increasing.


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.