28 October 2010

AP & Bloomberg Spin The Pre-Election Unemployment Numbers

The last weekly unemployment application numbers before next week's election are out. The MSM spin machines are firing on all cylinders:

AP:

Unemployment claims drop sharply to 434K

Fewer people applied for unemployment benefits last week, the second drop in a row and a hopeful sign the job market could be improving.

The Labor Department said Thursday that initial claims for jobless benefits dropped by 21,000 to a seasonally adjusted 434,000 in the week that ended Oct. 23.

It was the second-lowest number for claims this year. The only time it was lower was during the July 10 week, and that week was affected by the Independence Day holiday when state unemployment offices were closed.

Bloomberg:

Jobless Claims in U.S. Unexpectedly Drop To Three-Month Low

Claims for jobless benefits unexpectedly dropped last week to a three-month low, a sign the U.S. labor market may be starting to mend.

Initial jobless claims decreased by 21,000 to 434,000 in the week ended Oct. 23, the lowest since early July when fewer auto plants than normal closed for retooling, Labor Department figures showed today in Washington. The total number of people receiving unemployment insurance dropped to a two-year low, while those getting extended payments also fell.

Well! Sounds like good news! I mean, the second-lowest number of claims of the year! Two weeks in a row with declining new jobless claims! We're on our way!

Enh, not so much. Take a look at the data going back through June of last year, when the recession 'officially' ended:


All data is from the Department of Labor: data up through 2-Oct-2010 is from a report generated from here; data from 9-Oct through 23-Oct is from the press release here (possibly stale).

New jobless claims dropped pretty steadily from June '09 to about the end of the year, and they've stayed basically level since then. The questions at hand, though, are whether the data of the last three weeks heralds a 'sharp drop', presaging an economy resurgent; and if, really, this 'three-month low' really qualifies as an 'unexpected drop.'

In a word: No. All three most recent weeks fall within two standard deviations of the mean of the 2-Jan-2010 to 2-Oct-2010 data set. 'Sharp drop?' If the trend of these last three weeks holds for several weeks more, absolutely! In the context of historical data? It's just noise. Expected. Noise.

In fairness, the AP article does -- squishily -- present a few caveats of this sort:
Claims will need to keep falling to signal a widespread increase in hiring. Claims have fluctuated around 450,000 for most of this year, and have fallen below that level seven times. But they have always rebounded in subsequent weeks, and haven't remained below 450,000 for longer than two weeks.

You wouldn't infer any of that from reading their headline, however.

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