Special Factors in the Latest Jobless Claims Data

Weekly Jobless Claims eased sharply, weekly same-store sales soared and mortgage activity dropped off. There was a common denominator that threw a wildcard into the period for which each of these data-points were reported. While much of this data compensated for the July 4th holiday, none of it takes into account the effect of such holidays on business activity in the immediately preceding and following days.

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Special Factors in the Latest Jobless Claims Data

Weekly Jobless Claims eased by 22K to 405K in the week ending July 9. That’s good news right? Well, if you read my article earlier this week regarding the slippage in mortgage activity, then you know there’s a fly in the economic ointment through the week inclusive of the July 4th holiday.

In the case of the mortgage application data, the holiday is adjusted for, but (and this is important) the day after is not and it is a business day that is noticeably lethargic. You can see it in your office or on the streets. People are still on vacation after the long weekend, whether it be literally so or just figuratively. They are tired, mentally absent, lethargic slugs, and just not getting much accomplished. Yet, the day after the long weekend is counted like any normal business day, and therein lies the problem.

In the case of this Department of Labor (DOL) data, it is also seasonally adjusted. However, I posit it is not adjusted quite perfectly. It cannot account for the lethargy that keeps the newly unemployed from making it immediately in to apply for their benefits nor the pace at which government workers process the applications that make it through. Have you been to the DMV lately? I realize much of this can be accomplished over the telephone nowadays, but as anyone who has had to go through the process knows, it does also require the individual to visit the unemployment office initially. Very few people absolutely need to run to the office right away, especially since the “benefits” are appropriated to account for the days since last employment, as far as I can remember. So I think a decent number of Americans will even put off money collection over a short holiday.

That said, last week had a counterweight as far as the unemployment insurance report goes. The state of Minnesota shut down, sending a flood of previously publicly employed folks to the office. Minnesota estimates that about 11,500 of their filers last week did so because of the shutdown, and they’re counted in the claims number. Thus, if not for the holiday, this report would have a much different tone to it.

The four-week moving average for claims filings decreased by 3,750, to 423,250, and probably better reflects current reality than the weekly result does. Next week’s result could offer a compensatory increase in filings, a reaction to this week’s lethargy. If we hang on weekly economic results alone, then we’ll swing wildly with them in our investment performance as well. Thus, let’s be careful about how much weight we give to weekly economic data that runs through such holiday periods especially. As always, let’s also remember to look beyond the headline and even the report itself when analyzing economic data, as much can be gleamed through a broader scope.



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