Weekly Initial Jobless Claims are reported each Thursday morning by the government. Over the last several years, there’s been very little to celebrate about this data, but this week’s info is truly joyous. The data confirmed a new and lower plateau for the weekly rate of Americans hitting the unemployment line.
For the week ending Jan. 19, reported this Thursday, the new claims count stuck low, amounting to 330,000. The figure was down 5,000 from the prior week count, and it seemed to leave economists dumbfounded, with the consensus forecast set higher at 360K. With two weeks of a new lower plateau now seemingly in place for this data point, the four-week moving average for this figure fell as well by 8,250, to 351,750.
One week’s worth of data indicating such a significant shift is certainly suspect, but two weeks begins to form a trend. Suspicion cannot completely dissipate just yet, given the true unemployment rate likely remains much higher than what the government reports each month. The weekly jobless claims report is illusory in one respect, and lends to suspicion as well.
You see, the insured unemployment count can decrease for two reasons. For the week ending Jan. 12, also reported this Thursday, the insured count decreased by 71,000, though the rate of insured unemployment remained 2.5 percent.
The number of Americans receiving a benefit of some sort, including through aging unemployment benefit extension payments, fell by 214,076 in its reported Jan. 5 ending period. The tally still amounts to a depressing 5.66 million Americans receiving support, but it has been steadily decreasing.
The problem is that many of the people counted here are not finding work, but simply running out of benefits and falling off the government’s radar. The long-term unemployment count remains excessive as a percentage of the total, with some 39 percent of those reporting to the government having done so for 27 weeks or longer.
With questions arising recently about erosion of the labor force count, we can safely assume that some of these people simply stop reporting when their unemployment insurance benefits run out.
Even so, if the weekly flow of newly unemployed is truly moderating, then pressure is removed from the spigot. It’s a good thing for the economy and for stocks, and acted as a support to shares on Thursday.
The SPDR S&P 500 (NYSE: SPY) and the SPDR Dow Jones Industrial Average (NYSE: DIA), which track their respective indices, benefited from the news Thursday morning, though a weak earnings report from mega-stock Apple (NASDAQ: AAPL) weighed heavily against them and especially the PowerShares QQQ (NASDAQ: QQQ), which tracks the NASDAQ.
Trading in the shares of employment services firms like Robert Half International (NYSE: RHI), Korn Ferry Int’l (NYSE: KFY) and Monster Worldwide (NYSE: MWW), which all took off Thursday morning, more clearly reflect the impact of the jobless claims report.