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.
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