Political  Calculations
Recommend this article

What's the real story for the overall trend in new jobless claims in the U.S.?

It has been several months since we last featured an update of our statistical analysis of the trends in new jobless claims in the U.S., which is mostly by design on our part.

When we last left off, the overall trend, which we identified as Trend L, was largely flat, but characterized by extreme volatility, with unusual outliers in the data popping up with an alarming frequency.

Some of that was understandable. We saw the state of California mishandle its processing of new jobless claims, causing their reported number to plummet one week, but soar in the next as the state caught up to their mistakes. We saw the impact of the "superstorm" Sandy, which caused claims in the northeastern part of the U.S. jump well above the trend, then slowly fall back toward it, then fall below it, before rebounding back to the otherwise flat trend level established early in the trend as that region of the country recovered from the event.

And then, several weeks after that, we started seeing volatility to the downside. The data would suddenly fall outside the statistically expected range for one or two weeks, but then be right back up in it the next.

That was more volatility than we wanted to have to keep addressing on weekly or biweekly basis, so we opted to let the data settle down on its own and pick up the pieces later.

And that brings us today, because it turns out that what was happening is that Trend L was breaking down and being replaced by a new trend, which we'll unimaginatively call "Trend M".

Residual Distribution for Seasonally-Adjusted Initial Unemployment Insurance Claims, 11 February 2012 - 3 August 2013

What appears to have happened is that the number of initial unemployment insurance claims being filed each week "stepped down" from the higher level defined by Trend L's mean level of 367,915 to a lower level defined by Trend M's mean level of 344,402.

Recommend this article

Political Calculations

Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.

Be the first to read Political Calculation's column. Sign up today and receive Townhall.com delivered each morning to your inbox.