The Trend in Jobs isn't Our Friend
Posted by Doug Rice on Thu, Feb 25, 2010 @ 03:01 PM
There's an old saying, the trend is your friend.
But the converse is true when things trend the wrong way.
Initial jobless claims rose 22,000 to a seasonally adjusted 496,000 in the week that ended Feb. 20, the Labor Department said Thursday.
The four-week moving average, which helps smooth volatility in the data, was up 6,000 to 473,750. Continuing claims, which are drawn by workers for more than a week, also rose by 6,000 to 4.6 million in the week ended Feb. 13.
The news initially hit stocks pretty hard.
Duh.
But a small change percentage change isn't the key here, nor is the half a million initial jobless claims. While the horrible weather may have contributed to this, nevertheless, it's the trend change that is disturbing.
We were headed on a clear path toward fewer and fewer jobless claims. This last series of data shows that trend may reverse, putting a crimp into our hopes of economic recovery.
What can we learn from this
Individual data points don't tell us enough information to see into the foggy future. But trends, even though they are in the rear view mirror, can help. They confirm our previous suspicions and tell us when the road is changing direction.
Sure the path to recovery is going to hit bumps in the road, and this isn't a pothole we hit or a fall off a cliff.
However, if you are forecasting a recovery in jobs, then you are forecasting a decrease in initial jobless claims. That doesn't change with one data point. But a change in the trend will have impact.
Has the trend changed?
Well, maybe.
But that uncertainty is why we are looking at it.
The trend is your friend only because you recognize it and use it to your advantage.
Keep an eye on changes in trends and reversals. They may be the caution sign that prevents you from running off the road.