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Thursday, February 21, 2008

Rut Roh - Unemployment Claims

This week the four-week rolling average for SA initial claims moved up to 360,500. Generally a 4 week rolling average above 350,000 is considered recessionary by mainstream economists.

The headlines are pretty funny, because initial claims are supposed to have dropped 9,000 this week to 349,000. However that is not exactly comforting, because the previous week's advance figure was 348,000, which was revised upward to 358,000. Therefore the actual weekly trajectory for initial claims is up, not down. The trend of upward revisions on initial claims continues so it is exceedingly likely that this week's initial claims figure will be revised up next week.

I wonder how much of this relates to government jobs. The financial situation for quite a few states and even more municipalities can best be described as "strapped" and at the very least, many jobs opened by retirements are not being filled again. FUT treasury receipts still look strong, but government employers do not pay FUT, so a relative weakness in government jobs does not show up in FUT.

Continuing claims still show relative strength. The NSA number dropped, but the SA number rose nearly 50,000. Even though construction employment has diminished, at this time of the year construction employment is affected by weather, which can throw the seasonal adjustments off.

Overall a constraint on government employment accompanied by relative strength in private employment is a good trend. In the short term, it is likely to be extraordinarily painful because of the discrepancy between the wages and benefits paid to public sector employees versus private sector employees. This too must end for the overall economy to rebound without the need for bubbles and bizarre equity valuations.

Needless to say the ongoing problems with muni ARS bonds are not going to help government employment and spending.

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