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Real Time Insight

 

Now that the Federal Reserve has telegraphed a target for employment in the U.S., traders are paying close attention to all the gauges that help measure the health and trends of employment here in the states.

Part of that process is the analysis of the weekly unemployment claims.   Even though these readings tend to be volatile, they can offer insight into current trends and the outcome of both the ADP and BLS reports which are published each month.

This week’s unemployment claims jumped to 361,000 from 343,000 last week.   Expectations were for 358,000 claims to be filed.  Last week’s number was revised slightly higher to 344,000.

Since claims spiked in early November mostly attributed to Sandy, they have been trending lower until this week. 

The good news is that the four-week average of claims fell 13,750 to 367,750, a two-month low.   Many traders and economists use the four-week average to “smooth” out the volatility and better identify trends.

Continuing claims in the week ending Dec. 8 rose 12,000 to 3.22 million.

Is this good enough?

Weekly unemployment claims are certainly not the end-all, be-all when gauging the health of the U.S. Labor Market, but I’m wondering if the mid to high 300k range is enough?

There is no doubt a correlation between unemployment claims and the unemployment rate as demponstrated in the graphs below:

In the late 90’s into 2001, weekly unemployment claims were down in the high 200s to low 300s on average; at the same time unemployment was just over 4%.

From 2004 to 2008, the weekly readings were generally below 320k, during which time unemployment dropped from just over 6% to 4.5%.

Given the stubbornly high current rate of unemployment, I would think that unemployment claims should be averaging 300-320k, not the higher numbers that we have been averaging over the past couple of years.

Unemployment is inching lower, but the participation rate is also dropping, skewing that number lower.

Many say anything under 400k is a good number, but what do you think?

I;m curious to get everyone’s opinion on what a “satisfactory” weekly jobs claims number should be (to get the unemployment rate back below 6.5%), I’ll make it easy and give some basic ranges:

1.Anywhere under 400k is OK

2.The current readings of mid to high 300s

3.We should be seeing readings in the very low 300s

4.To get real unemployment down, we need claims at 300k or less

Let me know your thoughts!

(I’d vote for 3 myself)

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