Unemployment insurance initial claims not as bad as it seems

At first blush, that "5" handle on the weekly unemployment insurance initial claims number of 500,000 seemed awfully scary, seeming to strongly suggest that a double-dip recession is now a "slam dunk", but it's not quite that simple. First, the unadjusted initial claims number was only 401,856. That is a rather large adjustment and I have gotten used to taking the seasonal adjustments with a grain of salt, especially with an economy going through a major transition. Second, the more reliable 4-week moving average rose by only 8,000 to 482,500. A cardinal rule in econometrics is to never put any faith in a single data point in a data series, especially the latest data point which is always subject to revision. Sure, 482K is quite elevated, but is still well below the level a year ago of 567,250, so if we really are in a double-dip, it is nowhere near as severe as a year ago. In fact, both the adjusted and unadjusted initial claims numbers are well below the levels of a year ago, 575K and 458K, respectively. And just as a reminder, the overall economy was growing, albeit only at an annualized rate of 1.6%, in Q3 of last year. Finally, as of yesterday, Macroeconomic Advisers is still projecting annualized GDP growth of 2.4% this quarter. So, yes, the economy has slowed a bit, but nowhere near enough to run the risk of a true double-dip recession.

The bottom line is that the economy is still doing a bit better than a year ago, when GDP grew by 1.6% in Q3 of 2009.

-- Jack Krupansky