U.S. Jobless Claims Shows Two Steps Forward One Step Back Economic Recovery

By: Paul_L_Kasriel

Initial jobless claims, a relatively good short-term economic leading indicator that is not subject to large and frequent revisions, have increased for two consecutive weeks (see Chart 1). Should we call off the economic recovery? In nearshore sailing on Lake Michigan, my mates and I practice the "ten minute rule." That is, if the wind velocity changes such that it might be advisable to put a reef into or shake one out of a sail, we wait ten minutes before putting down our beer.

If conditions have not changed or moved more in the direction that got our attention in the first place, then we get busy. Perhaps it is advisable to practice the ten week rule when it comes to initial jobless claims. Although they get only lightly revised and are only subject to revision within four weeks of their first release, revisions do occur. Moreover, weekly seasonal adjustment factors are flukier than the winds on Lake Michigan. So, let's not "reef" our economic recovery call just yet.

Chart 1

History suggests that it is not unusual to see some upward short-term blips in initial claims near the end of a recession our early in the recovery. Examples of these short-term reversals can be seen in Charts 2 through 6.

Chart 2

Chart 3

Chart 4

Chart 5

Chart 6

So, keep the recovery faith. This always was going to be a three-steps-forward, two-steps-backwards kind of recovery.

Paul Kasriel is the recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy

By Paul L. Kasriel
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Copyright © 2009 Paul Kasriel
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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