Never mind: actually unemployment wasn't on the rise last week

02/11/2010 9:31 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Remember last week when everybody was in a dither about an unexpected increase in the number of workers filing an initial claim for unemployment? Suddenly the economic recovery in the United States looked in doubt.

Well, never mind. Today’s initial claims number, for the week that ended on February 6, dropped by 43,000 to 440,000. Economists had been expecting a decline to 465,000.

The week-to-week volatility in this number is a good reminder of, well, the week-to-week volatility in this number.

Last week’s increase in initial claims to 483,000 was such a shock because it argued that after dropping to 444,000 for the week that ended January 9 an improving employment picture had gone into reverse.

As initial claims marched upward in January—rising to 479,000 for the week of January 16, for example—some economists had urged a wait-and-see attitude to the numbers. Processing lags over the Christmas holiday, they noted, always did strange things to the numbers at the end of the year. But the surge in the numbers reported last week—so long after Christmas—raised doubts about that argument.

Well, it turns out, the Department of Labor now says, that a backlog of claims had built up over the Christmas holiday and that it took until last week to work through the paperwork pileup.

So the deterioration in the initial claims numbers in January and the sudden improvement this week are really just statistical reflections of lags in processing. And the numbers should start showing the real trend again, whatever it is, as we move deeper in February.

One thing to watch out for, a post this morning on Briefing.com reminded me, is that at this stage of the typical economic recovery big companies, which tend to be more aggressive in cutting workers and restructuring their work force in a recession, have largely finished their job cuts. They may even be starting to add workers. Last week, for example, Cisco Systems (CSCO) announced that it would add 3,000 jobs.

Smaller companies, on the other hand, tend to be slow to cut jobs in a recession out of loyalty to the members of a smaller work force or just out of a belief that the company can get through the hard times without doing anything drastic. So at this point in a recession, Briefing.com notes, a higher percentage of the newly unemployed come from smaller companies. The economy as a whole may be improving but Main Street will still be feeling the pain.

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