I’m chafing to write about the Chrysler situation but I’ll exercise a little discipline and talk for a minute about the unemployment claims. Actually, there’s probably more significance to these numbers than there is to Chrysler.
The news — the four week moving average fell by 10,750 to 637,250. The one week number was down 14,000 to 631,000. As always, the four week number is the more reliable of the two.
Of all the statistics we get bombarded with, this number probably has the most relevance. It’s as close as you can come to tracking real time moves in the job market and those moves tend to provide a good early warning system for the overall direction of the economy.
The WSJ Real Time Economics blog explains in more detail the significance of the employment numbers:
The four-week average is being very closely watched by economists right now, given this simple series has historically had impressive power for predicting when recessions are coming to an end.
As we noted a couple weeks ago, Robert J. Gordon, an economics professor atNorthwestern University who sits on the committee tasked with dating recessions, is one who finds enormous value in this series. Going back to the late 1960s, he has found that the four-week average of new claims peaks about a month before the declared end of recessions with remarkable accuracy.
As of right now, the four-week average claims series peaked at a level of 659,500 in the week ended April 4. If that number holds, based on the series’ past performance it would mean the recession ended somewhere between late March and early May — a far more optimistic read on the economy than any consensus forecast (the latest WSJ survey of economists shows on average they expect the recession to end in September). “The end of the tunnel may only be weeks away,” says Mr. Gordon.
Now as George Will famously said, “History tends to repeat itself until it doesn’t,” and that could well turn out to be the case with this recession. That doesn’t mean though that we can’t take a little hope out of these numbers.
And just to throw a little more cold water on this meme, the high level of unemployment may make it much harder to pull out of this downturn.