U.S. Initial JoblessInsurance Claims Unexpectedly Rise To Highest In One Month

Recent steadying in the job market stalled last week. The Labor Department indicated that initial claims for unemployment insurance rose to 480,000 from a little-revised 473,000 during the prior week. As a result, claims reached the highest level in four weeks but remained down from the recession peak of 674,000 hit in March. The four-week moving average of claims slipped to 467,500 and the latest weekly figure was higher than Consensus expectations for a decline to 465,000 claims.

Initial claims during the latest week cover the survey period for November nonfarm payrolls. Claims fell 21,000 (4.2%) from the same week in October. During the last ten years there has been a negative 84% correlation between the level of claims and the m/m change in nonfarm payrolls.· Continuing claims for unemployment insurance during the latest week ticked up 5,000 after a little-revised 289,000 decline during the week prior. Continuing claims were at the lowest level since late-February. The overall decline is a function of the improved job market but also reflects the exhaustion of unemployment benefits. Continuing claims provide an indication of workers' ability to find employment. The four-week average of continuing claims fell to 5,318,250. This series dates back to 1966.

Extended benefits for unemployment insurance retraced much of the prior week's decline with a rise to 503,100 during the fourth week of November. The latest compares to 550,343 during all of October.

The insured rate of unemployment remained stable at 3.9%, the lowest level since February. The rate reached a high of 5.2% during late-June. During the last ten years, there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics. · The highest insured unemployment rates in the week ending November 28 were in Wisconsin (6.4), Oregon (6.3), Alaska (6.2), Nevada (5.5),  Puerto Rico (5.5%), Pennsylvania (5.3), Michigan (5.3), California (4.9) and South Carolina (4.8). The lowest insured unemployment rates were in North Dakota (1.6%), Virginia (2.2), Texas (2.6), Maine (3.1), Wyoming (3.2), Maryland (3.2),  Mississippi (3.7), New York (3.8), Florida (3.8) and Ohio (3.9). The data are not seasonally adjusted but the overall insured unemployment rate is.· The unemployment insurance claims data is available in Haver's WEEKLY database and the state data is in the REGIONW database. 

The Conference Board's Index of Leading Economic Indicators continued its uptrend last month giving a strong signal that the recent recession has ended. The 0.9% rise during November was the eighth consecutive monthly increase. Moreover, the 10.2% (centered) rate of increase during the last six months was nearly the strongest since early-1983. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, consumer and capital goods orders.

The breadth of increase amongst the component series sagged again last month. Sixty-five percent of the components rose during November versus last month's reading of 70% that increased. During the most recent six months, however, 80% of the series rose. Prominent in last month's increase was a longer workweek, fewer jobless insurance claims, more building permits, and the steeper interest rate yield curve. These gains were offset by easier vendor performance, lower consumer expectations and a downtick in capital goods orders.

Continuing to suggest that the rate of decline in the economy is slowing were the coincident indicators which rose for the first month in the last three. The 0.2% gain followed an unrevised no-change during October. During the last six months the 1.4% rate of decline in the coincident series compares with a shortfall of 8.0% at its worst in January. Moderation of earlier declines has been due to higher industrial production, higher real personal income and higher business sales as well as easier declines in payroll employment.

In a continued sign that excesses in the U.S. economy are falling, the lagging index has been falling since January. Leading the decline has been lower commercial & industrial loans outstanding as well as slower growth in labor costs and less consumer credit. The ratio of coincident-to-lagging indicators (another leading indicator) also continued higher for the eighth straight month to the highest level since November.

The Conference Board figures are available in Haver's BCI database. Visit the Conference Board's site for coverage of leading indicator series from around the world.

The Philadelphia Federal Reserve Bank indicated that its index of regional factory sector activity rose this month to its highest level since early-2005. At 20.5, the index was unexpectedly strong and positive for the fifth consecutive month. The latest level compared to figures near -40.0 this past fall and winter.

During the last ten years there has been a 77% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 70% correlation with q/q growth in real GDP. The latest survey from the Philadelphia Federal Reserve Bank can be found here.· Amongst the components, the employment index was notably strong as it rose to well above break-even and to the highest level since late-2007. During the last ten years there has been a 91% correlation between the index level and the three-month change in manufacturing sector payrolls. Remaining strong were shipments, the workweek, unfilled orders and the delivery times components. The inventory component also improved significantly from its March low.

The prices paid index rose sharply to its highest level since August of last year and compares to negative readings this past winter and spring. During the last ten years there has been a 71% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 82% correlation with the change in core intermediate goods prices.

Expected business conditions in six months deteriorated for the sixth straight month. The December index fell to a still-positive reading of 24.4  but that was well-off the recent high. Many of the index components, especially orders and shipments, were down sharply.· The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database. 

UK retail sales volumes fell by 0.3% in November after having rise in October. Sales volumes have risen twice in the last three-months and seven times in the last 12-months.

The three-month rate of growth has dipped below the six-month rate of growth but still exceeds the 12-month growth pace. Clothing and footwear sales, however, are clearly losing momentum having dropped in the last three months. Retail ex-auto sales are off from their six month pace but nearly even with their 12-month pace.

In the new quarter, Sales are growing at a pace of 3% to 3.5%. That should help to underpin Q4 GDP growth.

In a separate report, the CBI survey of the distributive trades produced diffusion results saying that November sales were flat with those in October. That of course is more ambitious that the sales count from National Statistics (above). The outlook in the CBI framework was negative, however.

A poll of UK inflation expectations found that expectations were stuck at 2.4% for the third consecutive quarter. While this is above the BOE ceiling pace for inflation (of 2%) the Bank has admitted that there would be some temporary overshoot to which it will not respond. It is heartening that as inflation has risen in the UK, inflation expectations have not. BOE credibility seems to be well intact despite the damage done in the financial crisis.