The report for the prior week ending July 7, 2012 showed a decline in jobless claims to a four year low, but today’s report seems to prove that a single week does not make a trend. Jobless claims rose this period by 34,000 to 386,000. The 4-week moving average was 375,500, a decrease of 1,500 from the previous week’s revised average of 377,000. Most economists view the moving average as being more accurate.
This data is considered important by economists as it correlates with layoffs, but, recent data has fluctuated.
One reason for these fluctuations relates to the automotive industry that usually furloughs employees in early July to retool factories for the new models coming onto the market. When calculating data the DOL tries to compensate for these layoffs but may have over done it for early July.
Stronger auto sales led the industry to either make these furloughs shorter or cancel them entirely. This then led to the early July initial jobless claims report seem lower than they actually were and today’s number is actually in line with nation’s tepid economic activity.
In a note to his client’s concerning July jobless claims, Joseph LaVorgna, chief economist for Deutsche Bank wrote:
“It is not unusual to witness extreme moves around the July 4th holiday, because the timing of retooling-related shutdowns in the auto sector are notoriously difficult to account for — and this appears to be the case over the past few weeks.”
So July’s early numbers were a plateau before the big dip of a roller coaster sending hope for a decline in the unemployment rate from its current rate of 8.2 percent to plunge. Ellen Zentner, senior US economist for Nomura put it this way:
“Based on early claims data it isn’t likely that the unemployment rate — currently at 8.2% — will decline in July.”
Based on available data 3.3 million people filed for their second week of unemployment benefits for the period ending July 7, 2012. The number reflects virtually no change from the prior week.
None of this news is good for President Obama either. The July jobless claims data may finally allow his opponent, former Governor Mitt Romney of Massachusetts to gain the offensive in the presidential campaign and at least get a respite for attacks on him for refusing to release more years of his tax returns and for ascertaining the actual date he left the company he created –Bain Capital.