Thursday, July 16, 2009

Jobless Claims: The drop is REAL!!!

Oops.

Claims fell sharply and for the second week in a row.

Woops!

That was not supposed to happen.

Latest spin is that it's auto layoffs that are not occuring because they came earlier.

and so???? That means???


I grew up in Detroit and worked in the auto/truck assembly plants in the summer to earn money for college. Model chanage-over layoffs are fact of life there.

What the absence of layoffs tells us is that previous levels of claims were INFLATED by the early claims related to layoffs and other special events that took the place of those usual layoffs. As a result seasonal adjustment factors did not anticipate what happened as a shifting forward of layoffs. So now when we are not getting those layoffs, claims look for them and as a result the LEVEL of claims finally gets adjusted lower, to the correct level. It's an offsetting error.

There is nothing specious about the drop in claims. Many of the true drops in claims come around periods when people (economists) claim there are distortions. Dropping claims that fall this sharply for two weeks in a row look real to me.

Even Nouriel Roubin is taking down his black crepe.

So think about.

The improvement is real. If you contemplate what seasonal factors do and how they interract with unexpected events you can understand why. It's because the previous progress in claims had been hidden by the previous errors in the seasonal factors and now those errors are being corrected. The economy is getting better.


It's real. Don't fight the good news.

RAB

2 comments:

Anonymous said...

then why is Michigan up to 15% unemployment and a handful of other states now at double digits!!

Robert Brusca said...

Reply: Mich, my home state, is unusually impacted by auto troubles. Improvement per se is about changes. The national economy is getting better. The Drop in weekly jobless claims leads. the unemployment rate lags. Improvement is on schedule.

It may not be a schedule you like, but it is on schedule.