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Initial Claims Worst In 9 Months; Holiday Volatility Blamed For Surge

Tyler Durden's picture




 

For everyone who shrugged off last week's enormous spike in initial jobless claims as "can't be real", the BLS has another "holiday volatility"-blamed statistical anomaly for traders to ignore. Initial claims rose 10k to 379k - dramatically worse than the 336k expectation - and the worst since March. Though the BLS says no states estimated jobless claims last week, they would suggest, ever so humbly, that we ignore this data and focus on the trend of the 4-week moving average. Total benefit rolls also rose to 3 month highs, up 94k to 2.88 million. The piece de resistance - non-seasonally-adjusted initial claims were down 48.2k (against the seasonally-adjusted 10k), yet both are up exactly 13k from a year ago (seems the Sandy-based YoY adjustments are playing havoc).

 

 

 

Lastly, 1,374,031 American on Emergency Unemployment Compensation (ie. extended benefits) - which are about to run out thanks to Congress...

which will implicitly send the unemployment rate plunging....

With even the Fed somewhat challenging the credibility of the official unemployment rate - as labor force participation collapses structurally - the possibility that if Congress does not act by Dec 28th, a further 1.3 million people will lose emergency aid and may be deemed 'out' of the labor force merely exaggerates an already farcical situation. As JPM's Mike Feroli notes, the "official" unemployment rate may drop up to 0.8 percentage points, but it won't mean the economy is any better. Is this the 'excuse' the Fed needs to transition from QE to forward guidance (with the public seeing only a rapidly collapsing unemployment rate as evidence of their success) even as the data that they are so "dependent" on becomes worse than useless?

 

As we warned in November, the only two charts that matter ahead of Friday's likely distorted nonfarm payrolls report.

First, the labor force participation rate, which plunged from 63.2% to 62.8% - the lowest since 1978!

 

But more importantly, the number of people not in the labor force exploded by nearly 1 million, or 932,000 to be exact, in just the month of October, to a record 91.5 million Americans! This was the third highest monthly increase in people falling out of the labor force in US history.

At this pace the people out of the labor force will surpass the working Americans in about 4 years.

 

And if the Congress does not pass the bill to extend emergency aid - set to expire Dec 28th - then up to 1.3 million more people will be added to that list of 91.5 million already our of the labor force (and another 800,000 more to come in further months)...

This has profound implications for the oh-so-important unemployment rate that  the Fed is so dependent upon...

JPM's Feroli: One observation that could set an upper bound on thinking about a participation effect is to hypothesize that all 1.3 million EUC claimants exit the labor force after benefits expire in 1Q (again, should Congress allow that to happen). In that case, the unemployment rate would fall by 0.8%-pt, obviously an extreme example. Some of the Fed studies can help to narrow the range of outcomes.

 

One of the more recent works (Farber and Valletta from the San Francisco Fed) indicates that about a fifth of long-term unemployment is due to extended benefits. With just over 4 million long-term unemployed recently, this would imply that the absence of extended UI benefits could lower the unemployment rate by 0.5%-pt.

This will directly impact the Fed's credibility to manage the economt in a "data-dependent" manner:

JPM's Feroli: Setting aside the normative aspect of whether from a public policy perspective this is a desirable or undesirable outcome, such a fall in the unemployment and participation rates could create some tricky choices for Fed policymakers as they assess the health of the labor market.

 

 

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Thu, 12/19/2013 - 09:44 | 4260293 praps
praps's picture

Untaper - quick!

Thu, 12/19/2013 - 09:55 | 4260322 jekyll island
jekyll island's picture

NO!  It's bullish for gold and the stock market.

Thu, 12/19/2013 - 09:56 | 4260333 GetZeeGold
GetZeeGold's picture

 

 

So what is the unemployment rate down to now?

Thu, 12/19/2013 - 10:05 | 4260371 Joe Davola
Joe Davola's picture

What do you want the number to be?

Voila!

Thu, 12/19/2013 - 13:46 | 4261138 Nick Jihad
Nick Jihad's picture

If you think the numbers are dubious now, just wait til the BLS begins to contest the Nov 2014 elections.

Thu, 12/19/2013 - 10:09 | 4260387 Quinvarius
Quinvarius's picture

If they are publicly announcing something, they are doing the exact opposite in secret.  QE is not even close to half of what they have been doing.

Thu, 12/19/2013 - 10:24 | 4260444 SeattleBruce
SeattleBruce's picture

"At this pace the people out of the labor force will surpass the working Americans in about 4 years."

Everyone's hearing tell that work is over-rated, and that not working can pay off handsomely, if you can just swallow all your pride.  Forget about couch potatos, the US of A is set to become the loafer nation, and the middle class continues to get monkey hammered from above and below.  When the .1% have finished executing the massive wealth transfer from the middle class, they just might let this sucker go - as that middle class will shrivel up, and those boys will need to start a new game.  Will we let 'em?   They do have a lot of guns and bullets and (bought off) 'authority'.

Thu, 12/19/2013 - 10:58 | 4260574 toady
toady's picture

"Everyone's hearing tell that work is over-rated, and that not working can pay off handsomely"

So true. Work just ain't what it used to be. No more job for life, pension, healthcare, paid vacation, paid sick days... All those things built loyalty to an employer. Now it's just money, and damn little of that. It's a race to the bottom, and we're all gonna lose.

Thu, 12/19/2013 - 09:53 | 4260298 Obchelli
Obchelli's picture

Wow, surprised by such a weakness in the number... It's second week in a row unemployment is 60-70K higher than 4 week average just 2 weeks ago. And this is happening just before Christmas holidays.What is going to happen after New Year...

And they blame surge on Holidays when it should have been exactly opposit of that in natural flow of events - I thought hiring is up during Holiday season...

Does not bode well at all. And market? Of course no reaction cause every time it tries to have a natural reaction Kevin Henry hits Buy Market on S&P futures. 

Untaper - On

And today is double POMO day too

Thu, 12/19/2013 - 09:56 | 4260330 XAU XAG
XAU XAG's picture

Don't forget

 

They are already............seasonal adjusted

 

 

Thu, 12/19/2013 - 10:16 | 4260401 Obchelli
Obchelli's picture

Exactly that makes the number disaster

 

Than again they will always have wheather to blame...

Thu, 12/19/2013 - 10:47 | 4260521 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Or they will go for the hole card of blaming Bush.

Thu, 12/19/2013 - 09:56 | 4260334 Winston Churchill
Winston Churchill's picture

Santa has his sleigh loaded with pink slips.

With the inventory build up ,and declining disposable incomes, this can only end one

way for businesses to survive.

Thu, 12/19/2013 - 10:13 | 4260393 eclectic syncretist
eclectic syncretist's picture

A pink slip in every stocking!  Thanks for making me laugh WC.

Thu, 12/19/2013 - 10:12 | 4260389 max2205
max2205's picture

The FSA wins again.......

Thu, 12/19/2013 - 14:24 | 4261258 SDShack
SDShack's picture

The trendline since August implies that we will be over 400K per month at about the end of the 2014Q1.  That will coincide nicely with 0zer0care wallet shock taking down GDP. The really big lies start in 2014Q2 and will continue right up to election.

Thu, 12/19/2013 - 09:55 | 4260318 Cognitive Dissonance
Cognitive Dissonance's picture

Ignore that man woman jobs data behind the curtain. I am the all powerful and mighty Ben Yellen recovery.

Thu, 12/19/2013 - 09:53 | 4260321 oak
Thu, 12/19/2013 - 09:55 | 4260326 Evil Franklin
Evil Franklin's picture

Isn't it February that the bills come due?

Thu, 12/19/2013 - 09:58 | 4260337 Seasmoke
Seasmoke's picture

I still haven't paid the February 2011 bills. So I will just add the February 2014 bills to the pile. Can't believe these cards still work !

Thu, 12/19/2013 - 10:31 | 4260461 SeattleBruce
SeattleBruce's picture

Wait til they don't.  Then there's SNAP, and 'going back to college' and living in your (GM) Escalade, if need be.  The Food banks and Food kitchens are ramping up for the Holidays also...it's all good...;)

Thu, 12/19/2013 - 09:56 | 4260327 oak
oak's picture

deleted.

Thu, 12/19/2013 - 09:57 | 4260328 Seasmoke
Seasmoke's picture

So after the Great Taper. Bad news, must be bad news again ???

Thu, 12/19/2013 - 09:55 | 4260329 Sutton
Sutton's picture

Time to unTaper. Ben can't carry Janet across the Threshold.

Thu, 12/19/2013 - 09:58 | 4260332 thismarketisrigged
thismarketisrigged's picture

lol at the excuses for the rise in jobless claims.

 

these fuckers will come up with every excuse in the book to justify the rise.

 

every december is the holiday season, so does that mean that every single december, jobless claims r going to rise automatically?

Thu, 12/19/2013 - 10:01 | 4260336 buzzsaw99
buzzsaw99's picture

The fed doesn't give a flying fuck about unemployment and Feroli knows it. they are more worried about unemployment in china than they are about it in the usa.

Thu, 12/19/2013 - 10:06 | 4260376 Quinvarius
Quinvarius's picture

They will choose survival of the banks and global finance over the actual economy every time.  Which is unfortunate because the current banking system cannot possibly survive without massive money printing.

Thu, 12/19/2013 - 14:21 | 4261245 SDShack
SDShack's picture

It's the sociopath way.

Thu, 12/19/2013 - 10:04 | 4260357 Dr. Engali
Dr. Engali's picture

Damn, you mean to tell me that all those news reports I watched on teevee telling me how good holiday sales were are full of shit? Who could have thunk it? Soon you will be telling me that Zerocare has a negative impact on job growth too.

Thu, 12/19/2013 - 10:06 | 4260374 XAU XAG
XAU XAG's picture

@ buzz & Dr  +1000

Thu, 12/19/2013 - 11:35 | 4260696 dobermangang
dobermangang's picture

Visited a local Macy's yesterday afternoon.  The store was empty.  Waited 10 minutes before I found a clerk in the shoe department.  Still couldn't believe how few people were in the store so close to Christmas.  Things are really bad in the real world.  You just have to open you eyes and believe what you see.

Thu, 12/19/2013 - 10:09 | 4260385 Boondocker
Boondocker's picture

or in other words...Merry Christmas...

Thu, 12/19/2013 - 12:35 | 4260905 Ignatius
Ignatius's picture

I sense cynicism. 

Say "holiday volatilty" with the rest of us and find peace you seek.

Thu, 12/19/2013 - 10:17 | 4260419 ptoemmes
ptoemmes's picture

Central Planning is hard.  It's hard I tell ya.  Can we get a little more cooperation around here - how about it.

 

 

Thu, 12/19/2013 - 10:32 | 4260478 SeattleBruce
SeattleBruce's picture

It's especially hard because it doesn't work.  It's tough covering up this mess - don't you think?

Thu, 12/19/2013 - 11:23 | 4260647 The worst trader
The worst trader's picture

How about the truth? It's not working Ben! It will never work. 

Thu, 12/19/2013 - 11:38 | 4260716 Nobody For President
Nobody For President's picture

Merry Christmas to you 379K pinked slipped this week, and a Very Happy New Year to the 1.3 million about to get deep sixed from EUC.

If you want to see some good numbers, wait for the January SNAP card enrollment figures - new high anyone?

Thu, 12/19/2013 - 12:26 | 4260871 Luckhasit
Luckhasit's picture

91.5 million Americans! There's about 350 million of us.  That's 26.4% give or take.  Devastating.

Thu, 12/19/2013 - 20:34 | 4262332 honestann
honestann's picture

2014 is gonna be one complete disaster!

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And if people really do sign up for Obamacare, the economy of the USSA will definitely go down for the count.

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