Bloomberg’s chart of the day shows that the seasonally adjusted jobless claims could be skewing the data and providing a more dire outlook than reality.
Employment in the U.S. is rebounding at a “significantly faster” pace than seasonally adjusted data on jobless claims would suggest, according to Oscar Gruss & Son Inc.The CHART OF THE DAY compares this year’s unadjusted and adjusted figures on continuing claims, or the number of people receiving unemployment benefits who filed for them at least two weeks earlier. The data were compiled by the Labor Department.
The pre-adjustment total dropped for the last nine weeks, the longest streak since May 2008. The number of claims fell by 1.05 million, or 17 percent, during the period. Adjusted claims changed direction on a week-to-week basis throughout the period and declined by only 113,000, or 1.8 percent.
Continuing claims are the most reliable cyclical indicator of U.S. employment, according to Michael Shaoul, chief executive officer at Oscar Gruss, and Michael Aronstein, chief investment strategist. In their view, the adjusted figures overstate these claims after understating them earlier this year.
“Our assumption is that the sheer brutality of the current cycle has caused the statisticians to cease to trust the ‘raw’ data and therefore fall into the trap of abusing the process of seasonal adjustment,” they wrote in the report.
Shaoul and Aronstein estimated that continuing claims ought to be about 5.7 million on an adjusted basis, as opposed to the 6.14 million reported for the week ended Sept. 11.
Source: Bloomberg
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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