Claims Data Charts Show Fed’s QE Did Not Help, Government’s “Fecal Cliff” and “Secastration” Did No Harm

Courtesy of Lee Adler of the Wall Street Examiner

The latest weekly jobless claims data remains on trend, declining at an annual rate around -9%. The Fed’s QE program that it began late last year has had no impact on them. The rate of improvement was the same before and after the beginning of this round of QE.

By the same token fiscal cliff tax increase in January or the government spending sequester that took effect in March have had no negative impact on joblessness. The annual rate of change in claims is similar before and after these things took effect. Anybody who says otherwise is either ignorant or lying to support an agenda. Meanwhile, QE has managed to push stocks to bubble levels, from which they’ve been correcting, mostly for reasons that have nothing to do with QE being tapered or not, depending on which day of the week it is and which Fedhead is blowing it out his or her ass.

The Labor Department reported  that the seasonally adjusted (SA) representation of  first time claims for unemployment  fell by 9,000 to 346,000 from a revised 355,000 in the advance report for the week ended June 22, 2013. The consensus estimate of economists of 345,000 for the SA headline number was almost on the mark for a change.

Economists adjust their forecasts based on the previous week’s number, leading to them frequently getting whipsawed.  Reporters frame it as the economy missing or beating the estimates, but it’s really the economic forecasters who are missing. The economy is what it is.

Note: It’s crazy that the market focuses on whether the forecasters have made a good guess or not. Aside from the fact that economic forecasting is a combination of idolatrous religion and prostitution, the seasonally adjusted number, being made-up,  is virtually impossible to consistently guess (see endnote). Even the actual numbers can’t be guessed to the degree of accuracy that the headline writers would have you believe is possible.

The headline seasonally adjusted data is the only data the media reports but the Department of Labor (DOL) also reports the actual data, not seasonally adjusted (NSA). The DOL said in today’s press release, “The advance number of actual initial claims under state programs, unadjusted, totaled 334,978 in the week ending June 22, a decrease of 1,589 from the previous week. There were 370,521 initial claims in the comparable week in 2012.”  [Added emphasis mine]

The advance report is usually revised up by from 1,000 to 4,000 in the following week, when all interstate claims have been counted. Last week’s number was approximately 1,500 shy of the final number for that week released today.  For purposes of this analysis, I adjusted this week’s reported number up by 1,500. The adjusted number that I used in the data calculations and charts for this week is 336,000 rounded. It won’t matter that it’s a thousand or two either way in the final count next week. The differences are essentially rounding errors, invisible on the chart.

The actual filings last week represented a decrease of  9.2% versus the corresponding week last year. That’s slightly better than the 7.7%  drop the week before. The average  year to year improvement of the past 2 years is -8.8%, but the range is from near zero to -20%.  The year to year comparisons are now much tougher as the number of job losses declined sharply between 2009 and 2012.

The current week to week change in the NSA number is near zero. The currently weekly change compares with an average change of an increase of  less than 1,000 for the comparable week over the prior 10 years. Last year’s comparable week had an increase of 6,000.

Looking at the big picture, this week’s data is absolutely in line with the trend.

Initial Unemployment Claims - Click to enlarge

Initial Unemployment Claims – Click to enlarge

The Labor Department, using the usual statistical hocus pocus, applied a seasonal adjustment factor of 1.03. Over the prior 10 years the factor for the comparable week has ranged from about 1.1 to about 1.05. This week’s adjustment was below the range (see chart addendum at bottom of page).  Go figure.

The correlation of the  broad trends of claims with the trend of stock prices over the longer term is strong. It is most visible when the claims trend is plotted on an inverse scale with stock prices on  a normal scale.

Initial Unemployment Claims and Stock Prices - Click to enlarge

Initial Unemployment Claims and Stock Prices- Click to enlarge


Stock prices were running with the initial claims trend until the Fed started QE3 and 4 late last year, causing the stock price rise to accelerate. Stocks reached maximum extension within the trend channel of the past two years in mid May. Since then, stock prices have pulled back.  The Fed’s QE3-4 money printing campaign has had far more success in creating a stock market bubble, which was one of Bernanke’s stated goals (in slightly different words) than in driving economic growth, where arguably, it has done nothing. The stock market appeared to be in parabolic blowoff mode by February as a result of the excess liquidity. It reached at least a temporary limit in mid May.

Meanwhile the trend of improvement in claims slowed under QE2 in 2010-11 after a sharp rebound in 2009 and 2010 under QE1. It slowed even more under QE3-4 beginning in late 2012. The latest massive round of money printing has done absolutely nothing to spur this measure of the economy.

This is not an anomaly. The same result shows up in the broad spectrum of economic indicators. QE has failed. The Fed’s solution had been to do more of it, which has only served to drive the bubble in stock prices higher. The recent mass confusion coming from the Fed Open Mouth Committee is evidence that even the most delusional of the clinically insane Fedheads are beginning to face reality.

Left wing conomists have complained that the Federal Government’s fiscal cliff and spending sequester have taken a chunk out of growth.The claims data belies their specious assertions. The trend is the same now as it was before the fecal cliff tax increase and the recent spending secastration. Wall Street and big name academic economists find it easy to spew bullshit. The facts don’t support them.

As I’ve written since the spring, there’s plenty of room for a deep pullback in stock prices from here, but there’s also a chance that stock prices will decouple completely from economic indicators as long as the Fed ( joined by the BoJ) keeps cashing out the Primary Dealers every month via its asset purchase programs (QE3-4). Bernanke and his sycophants have sown tremendous confusion about when they will end QE, a reflection of their own confusion. Meanwhile in other corners of the world central bank balance sheets are going the other way and in China a massive wave of liquidation is also destroying fictitious capital in the West.  See US and Japan Pump It, Chinese Dam It and Suck, And Europe Sullenly Suffers Shrinkage – UPDATE.

More charts below.

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