Jobless Claims Trending Higher

By The Greek:

On the surface, today's Weekly Initial Jobless Claims Report looks favorable, but trouble continues to brew.

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This week's reporting of the Weekly Initial Jobless Claims data showed a week-to-week improvement, as claims numbered 432,000. The measure offered a favorable change of 13,000 from the prior week's reporting of 445K (revised). Bloomberg's consensus was looking for a reading of 448K, so on the surface, things look good.

However, the four-week moving average, which offers a clearer look at true trend, showed an increase of 7,250 benefits filers, to 445,750. The increase here offers reason to expect the August unemployment rate to rise further.

Some economists are discussing noise in the first time benefits filers data, since the government has extended benefits and it's unclear whether some beneficiaries are being counted as first time filers or not. As we look at the unemployment rate, this noise will of course not serve to overstate unemployment. Whether you are counting individuals as ongoing unemployed or newly unemployed is still going to put them into the unemployment box come tally time.

Insured unemployment, which we remind you counts individuals in the program for as long as they are either unemployed or until they have exhausted their benefits, stayed at 2.5% in the week ended August 9, as compared to the prior week. Keep in mind that a favorable catalyst to this measure occurs from a clearly unfavorable result, when the unemployed exhaust benefits, but still remain jobless.

Highest State Insured Unemployment Rates:

1. Puerto Rico - 5.8%
2. Michigan - 3.7%
3. New Jersey - 3.4%
4. Pennsylvania - 3.4%
5. Massachusetts - 3.3%
   

Largest State Increases in Initial Claims:

1. Georgia: +3,522
2. New York: +2,709
3. Puerto Rico: +2,274
4. Kentucky: +1,779
5. South Carolina: +1,571
   

Why Unemployment Should Deteriorate

State budgets are taking serious hits from lower real estate tax income on reduced appraisal values and sales data, and from lower income taxes and expectations on both the commercial and individual levels. Many investment banks, including Merrill Lynch (NYSE: MER), Lehman Brothers (NYSE: LEH) and others are already seeking withholdings back from New York. In order to balance budgets, states will have to take a close look at spending across the board. This should lead to inevitable reductions in municipal labor levels.

Stimulus funds have been used up or are now being deployed to stock children for their return to school. Despite the recent pullback in energy prices, including gasoline, consumers continue to look strapped for cash and sentiment remains dire.

The global economy is slowing, and this combined with nascent dollar strength, should begin to corrode one of our pillars of stability, export sales. As exports begin to see impact, further manufacturing and other employment erosion should occur.

The next reporting of unemployment will be on Friday, September 5th. The jobless rate stood at 5.7% for the month of July, when last measured on August 1st.

You can see our disclosure at the Wall Street Greek website, at www.WallStreetGreek.blogspot.com.