theodore M I R A L D I mpa ... editor, publisher, writer. katherine molé mfa ... art director

Thursday, July 24, 2014

Here's Why Everyone's Trashing Today's Awesome Jobless Claims

    • gm

  • We just learned initial jobless claims plunged to 284,000, their lowest level since 2006.
    Unfortunately, the data really does not tell us that much about the true health of the jobs market.
    That's because July is traditionally a time when automakers shut down their plants for retooling.
    According to Renaissance Macro's Neil Dutta, with auto sales surging, the figure instead says more about productivity. He writes: 
    Today's jobless claims data likely informs us more about production than employment. The unexpected decline to 284,000, the lowest since 2006, reflects the fact that U.S. auto production is in overdrive at a time when factories are normally shut down to retool for new makes and models. We would expect a significant pick-up in motor vehicle production and manufacturing employment in July.
    That said, the underlying trend remains healthy, Dutta says. 
    "The four-week moving average, which removes some of the 'noise,' continues to descend, falling to 302,000, a fresh cycle low. So, the underlying trend in firings remains low."
    Barclays is saying the same thing: the data is too noisy to be fully trusted, but we are definitely heading in the right direction. 
    ...mid-summer is the time of the annual auto industry shutdown for retooling of auto production plants. The timing of this process has been altered in recent years with some retooling being forgone altogether or shortened relative to previous cycles. As such, MNI reported that a Labor Department spokesman said that the month of July is usually volatile as a result of the retooling process and inability of seasonal adjustment factors to fully account for this process. As a result, we prefer to focus on the four-week moving average in initial claims, which suggest that the gradual improvement in labor market conditions continues. We look to subsequent reports to see if this week’s claims data were mainly driven by volatility in annual auto production retooling, as we suspect, or whether they reflect an acceleration in the pace of job market improvement.
    Yields on the U.S. 10-year note were up three points after the report. 

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