First time claims for unemployment compensation hit a 41 year record low last week at just over 198,000. This was the actual number, not subject to any seasonal hocus pocus. 41 years ago the labor force was only 60% as large as it is today, so on a workforce size adjusted basis this number was even more extreme.
There were just 1,400 claims per million employed workers last week. That compares with 1,905 in the Labor day week at the top of the housing bubble in 2006 and 1,785 in the Labor Day week at the top of the Internet Bubble in 1999. The Labor Day week always sees the annual low in claims, but the current week is remarkable in terms of how much lower it is than previous records. In stock market terms we think of a move like this as a “blowoff.” Was this the final “blowoff” in initial claims?
Almost certainly it is not good news, considering that previous records were also associated with bubble peaks and peak economic activity resulting from those bubbles.
In the previous week, the trend had appeared to go flat. A 2 year string of record lows in initial unemployment claims finally appeared to be ending. This week reversed that.
The stock market recently had a break. Historically, as bubbles start to deflate, employers usually seem to be the last to get the news. But the very fact of their record long term ebullience should be warning enough, as chronicled here in these reports over the past year. Employers still haven’t wisened up. The real job cuts are still to come.
The Department of Labor (DoL) reports the unmanipulated numbers that state unemployment offices actually count and report each week. This week it said, “The advance number of actual initial claims under state programs, unadjusted, totaled 198,597 in the week ending September 12, a decrease of 33,910 (or -14.6 percent) from the previous week. The seasonal factors had expected a decrease of 25,314 (or -10.9 percent) from the previous week. There were 242,318 initial claims in the comparable week in 2014.”
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