Unexpectedly Intriguing!
June 7, 2011

We now have enough data to be able to project the direction of the newest trend in U.S. layoff activity. The charts below reflect that new trend, for which we treated the seasonally-adjusted data for initial unemployment insurance claim filings of the week of 30 April 2011 as an outlier. The first chart represents the primary trends seen since 1 January 2006:

Primary Trend for Seasonally-Adjusted Initial Unemployment Insurance Claims, 7 January 2006 - 28 May 2011

Our second chart narrows the bands for the range into which seasaonally-adjusted new jobless benefit claim filings are likely to fall while the new trend remains in force:

Residual Distribution for Seasonally-Adjusted Initial Unemployment Insurance Claims, 7 January 2006 - 28 May 2011

At present, it appears that the overall trend is negative, as it appears that jobless benefits will be likely to generally rise in the weeks ahead, although with such a limited number of data points to define the trend so far, there can be quite a bit of volatility in the direction of the trend until it becomes more established.

We've identified the data point for 30 April 2011 in both our charts as an outlier, as this coincides with a sharp seasonally-driven increase in new unemployment claims in New York state, as thousands of school workers in the state filed for unemployment insurance compensation during their schools' annual one week long spring break period, the timing for which wasn't fully accounted for in the Bureau of Labor Statistics' seasonal factor adjustments.

So they weren't really laid off, nor did they lose any job benefits, but apparently, in New York, it's okay to have a union job with the government's public schools and get unemployment benefits if you're scheduled to be off work for a week, because well, that unemployment check is just another job perk provided for by the taxpayers.

Meanwhile, we've also updated our table describing the major trends in U.S. layoff activity to include the newest trend:

Timing and Events of Major Shifts in Layoffs of U.S. Employees
Period Starting Date Ending Date Likely Event(s) Triggering New Trend (Occurs 2 to 3 Weeks Prior to New Trend Taking Effect)
A 7 January 2006 22 April 2006 This period of time marks a short term event in which layoff activity briefly dipped as the U.S. housing bubble reached its peak. Builders kept their employees busy as they raced to "beat the clock" to capitalize on high housing demand and prices.
B 29 April 2006 17 November 2007 The calm before the storm. U.S. layoff activity is remarkably stable as solid economic growth is recorded during this period, even though the housing and credit bubbles have begun their deflation phase.
C 24 November 2007 26 July 2008 Federal Reserve acts to slash interest rates for the first time in 4 1/2 years as it begins to respond to the growing housing and credit crisis, which coincides with a spike in the TED spread. Negative change in future outlook for economy leads U.S. businesses to begin increasing the rate of layoffs on a small scale, as the beginning of a recession looms in the month ahead.
D 2 August 2008 21 March 2009 Oil prices spike toward inflation-adjusted all-time highs (over $140 per barrel in 2008 U.S. dollars.) Negative change in future outlook for economy leads businesses to sharply accelerate the rate of employee layoffs.
E 28 March 2009 7 November 2009 Stock market bottoms as future outlook for U.S. economy improves, as rate at which the U.S. economic situation is worsening stops increasing and begins to decelerate instead. U.S. businesses react to the positive change in their outlook by significantly slowing the pace of their layoffs, as the Chinese government announced how it would spend its massive economic stimulus effort, which stood to directly benefit U.S.-based exporters of capital goods and raw materials. By contrast, the U.S. stimulus effort that passed into law over a week earlier had no impact upon U.S. business employee retention decisions, as the measure was perceived to be excessively wasteful in generating new and sustainable economic activity.
F 14 November 2009 11 September 2010 Introduction of HR 3962 (Affordable Health Care for America Act) derails improving picture for employees of U.S. businesses, as the measure (and corresponding legislation introduced in the U.S. Senate) is likely to increase the costs to businesses of retaining employees in the future. Employers react to the negative change in their business outlook by slowing the rate of improvement in layoff activity.
G 18 September 2010 2 April 2011 Possible multiple causes. Political polling indicates Republican party could reasonably win both the U.S. House and Senate, preventing the Democratic party from being able to continue cramming unpopular and economically destructive legislation into law, bringing relief to distressed U.S. businesses. Fed Chairman Ben Bernanke announces Federal Reserve will act if economy worsens, potentially restoring some employer confidence. The White House announces there will be no big new stimulus plan, eliminating the possibility that more wasteful economic activity directed by the federal government would continue to crowd out the economic activity of U.S. businesses.
H 9 April 2011 Present Rising oil and gasoline prices exceed the critical $3.50-$3.60 per gallon range (in 2011 U.S. dollars), forcing numerous small businesses to act to reduce staff to offset rising costs in order to prevent losses.

If the current projected trajectory for the new trend holds, we would anticipate a 68.2% chance of the number of seasonally-adjusted new jobless claim filings for the week of 4 June 2011 to be between 417,800 and 439,400. There is a 99.7% probability that number will fall between 396,200 and 461,000.

We're pretty sure this isn't shaping up to be the kind of "recovery summer" the Obama administration was hoping would change their fortunes for the better last summer, but didn't. We suppose there's always next year.

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