U.S. jobless claims fall, but 4-week average rises signaling recession

Posted Feb 21st 2008 9:25AM by Joseph Lazzaro
Filed under: Bad News, Employees, Economic Data

Initial jobless claims fell 9,000 to 349,000 for the week ended February 15 -- above the 348,000 consensus estimate, the U.S. Labor Department announced Thursday. Claims for the previous week were revised up 1,000 to 358,000.

Also, the four-week moving average jumped 10,750 to 360,500, the highest four-week average since October 2005. Economists view the four-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

"The rise in the four-week moving average above 350,000 is a clear danger sign for the economy. Companies are increasing their lay-offs," economist Steve Affinito said. "We're seeing a steady, continual rise in lay-offs and now we can officially say lay-offs are indicating we're in a recession. It's something the Fed cannot ignore as it tries to right the U.S. economy."

The largest increases in initial claims for the week ending Feb. were in California, +7,857, Kentucky, +4,166, Illinois, +1,955, Georgia, +1,009, and Massachusetts, +501. The largest decreases were in Ohio, -2,752, Wisconsin, -2,232, North Carolina, -1,746, Pennsylvania, -1,608, and Florida, -1,410.

The number of continuing claims increased by 48,000 to 2.784 million from a revised 2.736 million for the week ended February 9, the latest period for which figures were available.

Economic Analysis: Again, a poor weekly statistic, one that continues to show sub-par employment conditions. Even more problematic, the four-week moving average soared above the U.S. Federal Reserve's danger zone of 350,000. The U.S. Federal Reserve considers a four-week average above 350,000 a signal of soft labor market conditions. In addition, the high and rising number of continuing claims, which measures the seasonally adjusted uninsured, at 2.784 million, also indicates a tepid job market. Jobless conditions continue to worsen, and this is something both the Fed and the U.S. Congress will have to address via additional monetary and fiscal measures in the period ahead.

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