The “declining jobless claims” snow job
Headlines from coast to coast blared the wonderful economic news this morning: “Jobless claims fall to lowest in four and a half years,” as Reuters put it.
Why didn’t it say “unexpectedly?” Not a single major media headline used that word. But they always say “unexpectedly” for bad economic news, at least since January 2009. I don’t know what changed in January 2009, but it’s funny how completely and suddenly every piece of bad economic news became “unexpected.” Maybe the reporting will change again in January 2013. Who can say?
But this particular development really was unexpected. “Initial claims for state unemployment benefits fell 30,000 to a seasonally adjusted 339,000,” reported Reuters. Analysts were expecting about 370,000 claims.
We don’t get a whiff of the “unexpected” until seven paragraphs in: “A Labor Department analyst noted that seasonal factors had predicted a very large increase in claims last week, which he said would be typical for the first week of the calendar quarter. Unadjusted claims did rise, but far less than expected, resulting in the sharp drop in the seasonally adjusted figure.”
Oh, so this was a bad report that got “seasonally adjusted” into a good one. What kind of adjustments are we talking about?
Would you believe… leaving out an entire state?
Many media reports made vague allusions to one state’s numbers heavily influencing the jobless claims report, but one got the impression this was because the state had exceptionally robust job growth, or perhaps a minor error in its data.
As the Wall Street Journal explained, there’s always a spike in jobless claims at the beginning of a quarter, because many unemployed workers deliberately choose not to file until the end of the quarter, to nudge up the income average used for the calculation of benefits.
“The Labor Department factors this trend into its seasonally adjusted figures,” says the Journal. “But last week, a Labor economist said one ‘large’ state didn’t report additional quarterly figures as expected, accounting for a substantial part of the decrease. The official wouldn’t disclose which state, but said it would be released with next week’s report as usual.”
(Emphasis mine.) How in the world can the Labor Department not headline the absence of such a huge pool of data – estimated to be worth a good 10 percent of the total number by a securities analyst, who described the resulting report as “worthless in terms of informing on the general economy?”
And most amazingly, how can they hold off on telling us which state it was? The Wall Street Journal relays speculation from JPMorgan economist Daniel Silver that it might have been a little out-of-the-way state, blessed with a booming job market that probably wouldn’t produce a lot of unemployment claims. You know, someplace like… California.
The gang at ZeroHedge has had enough of the Labor Department’s antics:
This is just getting stupid. After expectations of a rebound in initial claims from 367K last week (naturally revised higher to 369K), to 370K (with the lowest of all sellside expectations at 355K), the past week mysteriously, yet so very unsurprisingly in the aftermath of the fudged BLS unemployment number, saw claims tumble to a number that is so ridiculous not even CNBC’s Steve Liesman bothered defending it, or 339K.
Ironically, not even the Labor Department is defending it: it said that “one large state didn’t report some quarterly figures.” Great, but what was reported was a headline grabbing number that is just stunning for reelection purposes. This was the lowest number since 2008. The only point to have this print? For 2-3 bulletin talking points at the Vice Presidential debate tonight. Everything else is now noise.
ZeroHedge also wonders why we need more Quantitative Easing, “if the employment situation is back to normal.” But of course, it isn’t, not really. They’ve got a really eye-popping graph comparing the initial, headline-grabbing jobless claims (the blue line) versus the true, final numbers after subsequent “revisions.” You’ll notice the red line remains miserably constant.