The past two days have brought promising data on the employment situation in the country. Both the weekly jobless claims data put out yesterday and the jobs report today suggest that the recession may be at an end.
Every Thursday morning, the Department of Labor (DOL) releases information on the number of workers who have filed for employment benefits during the previous week. The key numbers are the initial claims, those first seeking such benefits, and the continuing claims, those who are currently receiving benefits. Yesterday, initial claims came in at 621,000, a decline of 4,000 from last week. Continuing claims stand at 6,735,000, down 15,000 from last week.
A few months ago, I performed an analysis of historical initial jobless claims in an effort to discover a metric that would indicate when this recession might end. I introduced a value I called the “8-4 number”, which is the difference between the current four-week running average of initial jobless claims and the same value from eight weeks in the past. I found that when the 8-4 number declined for eight successive weeks, a recession ended, and it ended very near the beginning of that eight week period. Currently the 8-4 number has been declining for six weeks. Further information on this can be found on my blog.
Although continuing claims declined for the first time during the current economic downturn, the four-week running average of this value is still increasing. Based on historical analysis, recessions have ended when this value declines for seven consecutive weeks. Based on this, we may not yet quite be at the end of this recession.
This morning, the DOL released its monthly jobs report. During May, 345,000 jobs were lost. This was substantially less than the 520,000 expected by economists. The unemployment rate reached 9.4%.
The four-month running average of the jobs number has now declined for two consecutive months. In the recent past, recessions end when this value declines for four successive months. Therefore, today’s unexpected decline was an additional hopeful economic sign.
Ken Spitze, Ph.D.
kenspitzeblog@yahoo.com
www.politicalandeconomicnumbers.blogspot.com
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