This really should not come as a surprise to anyone – U.S. Initial Jobless Claims Rose More Than Forecast

More Americans than forecast filed claims for unemployment benefits last week, a reminder that the labor market will be slow to recover.

Initial jobless applications rose by 11,000 to 531,000 in the week ended Oct. 17, from a revised 520,000 the prior week that were the fewest in nine months, the Labor Department said today in Washington. The number of people collecting benefits fell, while those receiving extended benefits increased.

Economists project the unemployment rate will reach 10 percent by the first quarter of 2010, underscoring the risk to consumer spending, the biggest part of the economy. Companies cutting costs remain reluctant to hire, even as they’ve eased dismissals from levels seen earlier this year.

Things to remember:

1) There is the “initial” number for jobless claims and the “continuing”

2) Continuing may show drops as the government stops counting people after benefits run out

3) I believe we will hit 10% on the reported unemployment this year, unless the records are complied to show the drop in benefits

4) Actual unemployment is between 16% and 22%

Not trying to be a fear monger here, I’m really trying to keep the positive of life in mind, but I do have to point out that Continued Unemployment Claims have hit a record high.

In the week ending May 16, the advance figure for seasonally adjusted initial claims was 631,000, a decrease of 12,000 from the previous week’s revised figure of 643,000. The 4-week moving average was 628,500, a decrease of 3,500 from the previous week’s revised average of 632,000.

The advance seasonally adjusted insured unemployment rate was 5.0 percent for the week ending May 9, an increase of 0.1 percentage point from the prior week’s unrevised rate of 4.9 percent.

The advance number for seasonally adjusted insured unemployme;nt during the week ending May 9 was 6,662,000, an increase of 75,000 from the preceding week’s revised level of 6,587,000. The 4-week moving average was 6,480,500, an increase of 131,000 from the preceding week’s revised average of 6,349,500.

The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.071 million.

One must keep in mind that unemployment is a lagging indicator, but an initial claim of 631,000 is still significant. The record high of 6.66 million shows just how bad things have been in terms of employment in the U.S. during this recession.

Remember, as the automotive industry continues to “right size” one can reasonably expect the employment number to be negatively impacted.

Here is another indicator of the weak job market, brought to us by the friendly people at the U.S. Department of labor:

In the week ending May 9, the advance figure for seasonally adjusted initial claims was 637,000, an increase of 32,000 from the previous week’s revised figure of 605,000. The 4-week moving average was 630,500, an increase of 6,000 from the previous week’s revised average of 624,500.

The advance number for seasonally adjusted insured unemployment during the week ending May 2 was 6,560,000, an increase of 202,000 from the preceding week’s revised level of 6,358,000. The 4-week moving average was 6,337,250, an increase of 128,750 from the preceding week’s revised average of 6,208,500.

A few things to note regarding this data:

• The initial claims number, while high, is roughly 30K less than the peak number (for this recession) that was established a few weeks ago

• The continued claims of 6.56M is a new record

• If GM goes into bankruptcy, it is reasonable to expect that initial claims will remain high even if other areas of the job market improve slightly

• If initial claims remain high, there will be a cascade effect to other areas of the economy – namely retail.

Bottom line: The “green shoots” of hope seen by the Federal Reserve are long since gone. While the economy may be in a bottoming process, we are far from being in a good position.

As of this writing (12:30 PM central on 1/2/09) the DOW is up roughly 4.92% in the last 3 trading days – roughly a gain of 419 points.  In that time nothing has change in the economy, and actually, the news that continues to surface points to bad economic fundamentals.

Just take a look at what has come out in the last three days..

Ford expects an industry wide fall in auto sales of 35% in the month of December, year over year

Manufacturing orders hit a 60 year low

The manufacturing index drops to a 28 year low

Continuing Jobless claims rise in December, point to hard 2009

It is said by many that the stock  market looks forward roughly 6 months. That is to say the price today reflects the economic activity in 6 months.  With the news that is continuing to hit the market, there is no way one can reasonably expect such a quick economic recovery.  I would say that the stock market has moved too far, to fast on no positive data.

This may be due to the new year or because Obama will be taking office in a matter of days, no one can be sure for the 5% move, but I am very wary of such a large advance on no fundamental change in economic forecast.

Update at 3:15PM: The market closed up above 9K, up 6.1% in the last 5 days.  Is this the famed Santa Rally?  Also, Martin Feldstein, Harvard Professor of Economics, believes the economy will be worse off 1 year from now.