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Jobless Claims vs Jobs: Charting The Relationship

Tyler Durden's picture





 

Tomorrow the BLS will announce that last week's initial claims number was revised to over 400K, the first time this important level has been breached, this time in an adverse fashion, in the past 2 months. But why is 400K important, and why do economists and pundits put impact on this particular number? Here is Bank of America with the explanation in the form of a historical matrix, correlating the historical relationship between these time series, highlighting the notable patterns observed in the past several decade, and what it all means for the big picture.

Here is Bank of America "Chart of the day"

A frayed relationship: Since January 1990 there has been a tight relationship – as claims decline, payrolls increase – between jobless claims and private payroll growth. However, the nearby chart, shows that this relationship has shifted recently.

Amd the explanation:

Several months ago we published a report called A Simple Relationship Souring where we discussed a breakdown in the relationship between jobless claims and payroll growth. In particular we noted that the breakeven level on jobless claims – the level of claims consistent with positive payroll growth – has likely risen. New research from the Federal Reserve Bank of St. Louis1 comes to a similar conclusion.

 

The Federal Reserve Bank of St. Louis comes to three key conclusions:

 

1. The researches found that the current threshold – the particular level of claims associated with an improving labor market (faster job growth andfalling unemployment) or a faltering labor market (declining job growth and rising unemployment) – for jobless claims are 400,000. That is consistent with the current rule of thumb estimate many analysts quote.

 

2. The report find that the claims threshold varies significantly over time. The researches note that the varying threshold is a function of changing labor market dynamics driven by changes in potential output, population growth, and labor force participation rates. For example, from 1957 to 1975, the threshold averaged about 318,000. That was similar to the average from 1995 to 2006. However, during the period 1976 to 1994 the threshold level for initial jobless claims was 474,000.

 

3. Lastly, the report found that there is a high negative correlation between monthly employment changes and the difference between the actual level of initial claims and the threshold estimate. Or in other words, when claims rise above the threshold level, employment growth slows or falls and when claims fall below the threshold level employment growth accelerates or turns positive.

 

As we noted in A Simple Relationship Souring the recent threshold level of initial jobless claims has probably risen since the end of the recent recession. See the chart of the day. The bottom line is that while the breakeven level on jobless claims has probably risen. Our advice to investors today is to not fixate over the level of jobless claims, but the general direction. Over, the last 12 months jobless claims have been moving sideways. That suggests that employment growth will not accelerate meaningfully in the near term. Looking farther ahead, our forecast assumes a slowing in economic growth in the second half of this year and that is why we’ve penciled in a slowing in payroll growth.

 


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Wed, 01/18/2012 - 11:27 | Link to Comment trav7777
trav7777's picture

Revisions, bitchez

Wed, 01/18/2012 - 11:38 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I have been saying for weeks that Sprott should close down his ETFs because the shorts would kill him.  Now look what happened.  The shorts killed him.

Wed, 01/18/2012 - 11:50 | Link to Comment POpatriot
POpatriot's picture

Physical silver recently disconnected from paper silver with a 30% premium to NAV as noted on Zerohedge recently.  All you need to do is look at the graph though.  Paper markets are apparently still valid and with company's like APMEX pegging it to the paper price I don't see how they wouldn't be valid.  It would be a great arbitrage opportunity.  Sell short PSLV and buy physical.

http://finance.yahoo.com/echarts?s=PSLV+Interactive#chart6:symbol=pslv;range=1y;compare=slv;indicator=ema+sma(300)+volume;charttype=line;crosshair=on;ohlcvalues=1;logscale=on;source=undefined 

Wed, 01/18/2012 - 11:59 | Link to Comment antonwarnung
antonwarnung's picture

Looks to me like things reconnected today.  PSLV off 9% ouch bcause of a new offering at 13.20/share.  Mr. Hendrix were you speaking of PSLV or other/all Sprott ETFs regarding the shorts?

Wed, 01/18/2012 - 12:16 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

PSLV specifically.  I wrote that he should close the fund and mail the physical to the shareholders, because he was doing more harm than good allowing people to short "silver".

Wed, 01/18/2012 - 11:56 | Link to Comment redpill
redpill's picture

 

On a long term basis wouldn't one expect the threshold to drift up over time in absolute terms merely due to a growing population/work force? 

Perhaps something more appropriate would be to look at the ratio of jobless claims compared to the size of the labor force overall, and a more consistent relationship would be found.

Of course all this assumes the BLS hasn't been actively skewing the numbers over the last couple years, which of course they have, so it's all a bit moot.

Wed, 01/18/2012 - 12:25 | Link to Comment economics1996
economics1996's picture

The only independent variable that would significantly impact the threshold would be the aging population and retirements. 

Also the BLS does not adequately capture the illegal labor markets, juicing the numbers to flatter Washington politicians.  The best indicator of where the economy is at in employment is the civilian participation rate and civilian employment-population ratio looked at from 1999-2000, when they peaked at 67.2%, today 64%(29 year low), and 64.7%, today 58.5% (28 year low).

These numbers show that our employment level is at the level back in the early 80s recession.  All the hope and change BS about economic growth is crap.  The growth is the 10.9% deficit.  Borrowing money is not economic growth.  Our real growth rate is down 6.8% since 2007 and down 0.8% in 2011.

Wed, 01/18/2012 - 12:44 | Link to Comment trav7777
trav7777's picture

the shorts didn't kill him, he pulled a secondary and cashed out all the lemmings who ran the premium to NAV up.

There was NO decoupling from physical to paper...there was a decoupling from PSLV to NAV of PSLV.  I tried to short PSLV as an OBVIOUS pair trade against long SLV and there are just no shares available to short.

Wed, 01/18/2012 - 11:29 | Link to Comment FOC 1183
FOC 1183's picture

and BoA clients pay (at least soft dollars) for this?

Wed, 01/18/2012 - 11:29 | Link to Comment Iriestx
Iriestx's picture

http://www.washingtonpost.com/business/industries/hovensa-oil-refinery-run-by-hess-venezuelas-pdvsa-in-us-virgin-islands-to-shut-down/2012/01/18/gIQA38tk7P_story.html

 

350k bpd refinery in the US just shut down, my refinery. I'll soon be joining the ranks of the unemployed.

Wed, 01/18/2012 - 11:39 | Link to Comment Captain Kink
Captain Kink's picture

 Condolences.  I wish you the very best of luck.

Wed, 01/18/2012 - 11:57 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

I'll soon be joining the ranks of the unemployed.

Resist any temptation to join the unemployed.  Make sure you move all the environmental cleanup aspects of your skillset to the top of your internal capabilities statement; Hess will be shutting her down for a long time.  USVI is a nice place to live and work.  I'd try to stay on there as long as I could.  Also, there will be a demand for people experienced with shutting down and cleaning up refineries.

Do you know who got the contract for scrapping her out...I presume to China?  They will be hiring.

Wed, 01/18/2012 - 11:58 | Link to Comment Iriestx
Iriestx's picture

I've got another gig lined up actually.  My skillset is in IT.  I'll ride out the 90 day plant closing and have another opportunity waiting. I'm one of the lucky ones. 

Wed, 01/18/2012 - 12:17 | Link to Comment Captain Kink
Captain Kink's picture

that's great to hear...glad you're landing on your feet. 

I'm going to be in St. Croix in February...any recommendations for good local food/fun?

Wed, 01/18/2012 - 15:51 | Link to Comment Hohum
Hohum's picture

St. Croix's a lot quieter than it used to be.  I went many times as a kid in the 70s and went again last year.

Angry Nate's on the pier in Christiansted ain't bad for food and drink.

Wed, 01/18/2012 - 11:47 | Link to Comment RockyRacoon
RockyRacoon's picture

Statistics are all well and good.... until you become one of them.  

Like getting swept up in the flood waters.   Good luck.

Wed, 01/18/2012 - 11:57 | Link to Comment mtomato2
mtomato2's picture

Iri, you're in good company.  The New Normal is breaking my heart.  I have always been self employed, but all my industries dried up.  So I tried to go back to teaching, only to see them fire an unprecedented number of teachers in my district, and all those around me.  I think, just yesterday, after three loooooong years, I may just have gotten a promising lead.

Good luck and God Bless.

Wed, 01/18/2012 - 12:47 | Link to Comment trav7777
trav7777's picture

i guess we don't need gasoline

Wed, 01/18/2012 - 11:30 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Do not think about bad news, all is well... serious.

Wed, 01/18/2012 - 11:52 | Link to Comment Eeyores Enigma
Eeyores Enigma's picture

The jobless recovery

America will not recover until it is jobless.

Wed, 01/18/2012 - 11:31 | Link to Comment Dr. Gonzo
Dr. Gonzo's picture

If the 1% can get enough of the 99% unemployed, underemployed, and or all in low paying dead end job's than maybe we can avoid a hyperinflation. Not only are there way to many dollars floating around in the open, their are even more lurking in the shadows, plus way more locked up in prison waiting to be released and worse yet so many unborn dollars who are right now just a twinkling in Ben Bernake's eye. As long as these dollars aren't allowed to chase goods and are all kept sterilized by the 1% the illusion of the whole thing working might be able to go on a couple more years. They have to keep the boot heel on the 99% for this to work though. No prosperity allowed. Obama's campaign slogan should be: "A jobless recovery. We did it!" or "Be glad you all aren't in prison yet." Mitt's could be. " The 1% are the job creators...because we also create the money you dumb sheep. now get back to your 3 minium wage jobs and pay your taxes because it's not your money."

Wed, 01/18/2012 - 11:31 | Link to Comment Ruffcut
Ruffcut's picture

There are still jobs planting tulips. Good pay.

Bernanke makes 2 grand an hour planting his two lips on all kinds of bankster weener.

Wed, 01/18/2012 - 11:34 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

As obvious as this may sound (and sometimes the obvious needs to be publically spoken) manipulated and distorted 'economic' numbers will only produce what they are intended to produce. That being more and more manipulated and distorted 'economic' numbers.

Or as they said in the old days of punch card computer programming......."Garbage in, garbage out".

Wed, 01/18/2012 - 11:38 | Link to Comment Bay of Pigs
Bay of Pigs's picture

You mean like the daily poundings we have taken on the COMEX for the last several months? Like clockwork.

All documented quite nicely for the Kid Dynamites and Brian OFlanagans of this world.

Wed, 01/18/2012 - 11:49 | Link to Comment RockyRacoon
RockyRacoon's picture

I ain't takin' no beatin'.

Homey don't play dat.

Wed, 01/18/2012 - 12:06 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I agree. The only beating we take (if all we hold is physical PMs) is a psychological one when we measure our 'real' money in relation to "their" fake fiat. 

Nice you see you romping 'round the ZH threads this morning RR.

Wed, 01/18/2012 - 12:31 | Link to Comment Bay of Pigs
Bay of Pigs's picture

By "we" I meant being victims of manipulation and fraud via the COMEX. Certainly not participating there.

 

Wed, 01/18/2012 - 13:38 | Link to Comment RockyRacoon
RockyRacoon's picture

Perhaps we should be thanking them for holding the "price" down so we can back up the truck.

Wed, 01/18/2012 - 12:34 | Link to Comment Bay of Pigs
Bay of Pigs's picture

People holding the miners are also victims of naked shorting (fraud).

Not having any regulators actually regulating is the biggest problem of all.

Wed, 01/18/2012 - 12:02 | Link to Comment Cpl Hicks
Cpl Hicks's picture

"GI, GO" is still alive and well as a operating principle.

Witness the presidency of Barry O. And witness the coming manipulation of all things economic, social, scientific and moral by his reelection campaign.

Wed, 01/18/2012 - 12:02 | Link to Comment DeadFred
DeadFred's picture

Government stats have long been suspect but it's interesting that such a shift occured in 2009. I can't decide where I want to place the blame. Was it the government trying to to improve the economy with propaganda once we entered Great Depression II or was it because we replaced one lying scoundrel as head of state with a uber-lying scoundrel. Hard choices.

Wed, 01/18/2012 - 11:34 | Link to Comment Snakeeyes
Snakeeyes's picture

Great chart. But I still like my chart of non-participation in the labor force at 41.5%, the lowest since Jimmy Carter and not getting any better.

http://confoundedinterest.wordpress.com/2012/01/18/mba-purchase-and-refi...

I hope the jobless claims improve in a serious way.

Wed, 01/18/2012 - 11:49 | Link to Comment Captain Kink
Captain Kink's picture

It really is a Depression.  That participation number climbed and climbed, ostensibly to include women in the workforce, too. 

Wed, 01/18/2012 - 11:36 | Link to Comment Dick Darlington
Dick Darlington's picture

Priced in!

Wed, 01/18/2012 - 11:42 | Link to Comment adr
adr's picture

Wow finding a correlation in fake data to support fake data!!! How does a 400k print support job creation when the real loss was over 650k per week and IRS payroll records only show an increase of 26k jobs? All I read was a bunch of nonsense trying to raise the threshold once again to a point where the MSM can claim massive job growth. Remember when claims above 250k were bad, then 325k, then 375k. Now aything under 400k means massive job growth. 

Wed, 01/18/2012 - 11:51 | Link to Comment RockyRacoon
RockyRacoon's picture

It's an election year.   All sorts of magic happens.

Wed, 01/18/2012 - 18:17 | Link to Comment PrinceDraxx
PrinceDraxx's picture

Is magic the politically correct pronunciation for bullshit now?

Wed, 01/18/2012 - 11:42 | Link to Comment onebir
onebir's picture

If the chart is labled correctly the current threshold level for +ve payroll growth is is 474k, not 400k...

Wed, 01/18/2012 - 11:52 | Link to Comment haskelslocal
haskelslocal's picture

Why is it called a Threshold and not a breakeven?

Why are these dots mostly scatter print and irrelevant?

Why isn't a there a target labled specific to today's date?

Where on the chart are years referenced? Do we have to immagine what all the dots are for and when they occured?

More junk data. But at least we know we need to create somewhere north of 400k jobs a month on average and we're not. But we already know the outcome and consequences to that. Increase in artificial perception.

Wed, 01/18/2012 - 11:49 | Link to Comment Dick Darlington
Dick Darlington's picture

OT: Bad loans rising and deposits shrinking in Italy

http://uk.reuters.com/article/2012/01/18/italy-banks-report-idUKL6E8CI2V...

Same for Spain according to data released today by Bank of Spain. Bad loan ratio rose to 7,5%.

Wed, 01/18/2012 - 11:50 | Link to Comment Spigot
Spigot's picture

"The bottom line is that while the breakeven level on jobless claims has probably risen. Our advice to investors today is to not fixate over the level of jobless claims, but the general direction."

Jeepers! Thanks, Daddy, for telling me what to think.

Wed, 01/18/2012 - 11:52 | Link to Comment boeing747
boeing747's picture

Adobe to lay off 750

Oakland city to lay off 1500

Cisco to lay off 11500 finished or not?

Coming Yahooooo lay off

Coming Oracle lay off

Wed, 01/18/2012 - 12:04 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

At least the Bay Area real estate market has hit bottom...

Third quarter 2011 median home price: $585,000

...not.

 

Wed, 01/18/2012 - 11:54 | Link to Comment pazmaker
pazmaker's picture

freightliner/daimler just announce the recall or hiring of 1100 people here in North Carolina, stating that there is a demand for big trucks and that it indicates tht the economy is picking up.  This is also a union shop.   I know some people that have worked there and it is on again off again, but they are promoting this(with a visit from the Governor) like as if it was creating hundreds of thousands of jobs. 

 

I be willing to bet that within a year they will turn around and lay these people off again.

Wed, 01/18/2012 - 11:56 | Link to Comment 847328_3527
847328_3527's picture

wait 'till a few hundred thousand troops are brought back to this job market....

bad stuff....

Wed, 01/18/2012 - 12:05 | Link to Comment Hobbleknee
Hobbleknee's picture

Who's bringing troops home?  Not the Nobel peace prize winner, that's for sure.

Wed, 01/18/2012 - 12:07 | Link to Comment Jena
Jena's picture

Unfortunately, there will be another forward kinetic action to divert them before they have a chance to be added to the numbers here.

Wed, 01/18/2012 - 11:59 | Link to Comment bankonzhongguo
bankonzhongguo's picture

Today's unemployed is tomorrow's revolutionary.

Idle hands are the devil's playground.

The red coats can put as many citizens in prison camps as they want for protesting the corporate injustices across the Land.

But jobs keep hungry people fed.

Funny how US household incomes are falling by unemployment and inflation, yet there has never been a time when so much money was printed yet none of it appears above the heads of the Amerikan people.

Helicopter Ben.  You're hovering over the wrong country.

 

Wed, 01/18/2012 - 11:58 | Link to Comment crazyv
crazyv's picture

As the absolute number of jobs in the economy increase should not the threshold number for initial claims also increase?

Wed, 01/18/2012 - 12:20 | Link to Comment Stuck on Zero
Stuck on Zero's picture

The good news is that the fewer jobs we have the fewer the number of initial claims.

Wed, 01/18/2012 - 12:42 | Link to Comment Clark Bent
Clark Bent's picture

I have read that the number of persons in the U.S. job market has been declining as a percentage of general population. If this is true then it means that fewer actual people are holding jobs (and being officially productive). I assume this means that GDP is actually declining and the government redistibution Ponzi is accelerating towards the inevitable socialist model of everybody not in the power elite in poverty. Certainly the trend since at least the eighties has been a decline in personal income as experienced by the necessity of a two income household to mantain a pretense of being in the middle class. Further, when the surprisingly energy rich U.S. is placing more productivity offline via regulatory disease and malinvesting actual resources in silly renewables, one must expect less for everyone. Less money, less jobs, less college, less hospitals, less savings and less investment. Again we experience the usual costs of a crony market with its usual inefficiencies and squandering of lives and resources. Same as it always is. Humans as a speciies seem unable to retain the lesson that liberty is better than slavery. As Hayek succinctly put it, Socialism means slavery. Do people want slavery, surprisingly the answer is yes.  

Wed, 01/18/2012 - 18:36 | Link to Comment hardcleareye
hardcleareye's picture

Hayek believed that socialist means of allocating labor fail to give workers an "intelligible yardstick by which to measure the social importance of different occupations." Thus, "it would be impossible for anyone intelligently to choose between various alternatives if the advantages they offered him stood in no relation to their usefulness to society" (1944, 125). Here Hayek refers to the economic incentives involved in the allocation of labor among different employments.

Wall Street Bankers must be VERY "useful" to our society......... because Karl Marx's defination of socialism is NOT the system "in play" in the USA... 

Wed, 01/18/2012 - 13:14 | Link to Comment Shizzmoney
Shizzmoney's picture

Learn how to grow your own food.  Learn how to play poker.  Sell weed.  Maybe do some internet affiliateship banner marketing (although if SOPA passes, this will dry up).

Fri, 04/27/2012 - 05:51 | Link to Comment jaanp444
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