Unemployment Claims Weekly Chart; Claims at Multi-Decade Lows; Rising 4-Week Moving Average Hints that Recession is Approaching

The weak Retail Sales dominated the headlines yesterday although the Jobless Claims are far more interesting. One of the key metrics that a recession is approaching, is a rise in unemployment claims. Any high school kid can figure this one out. People lose their jobs in a sick stagnant economy that is falling into or already in recession. Duh. It is a no-brainer.

Typically a rise in claims for 5 or 6 months (trending higher) signals the start of a recession. This metric always occurs ahead of a recession although it can provide occasional false signals. Claims sometimes rise for 5 or 6 months but a recession does not occur and the claims resume a downward trend again. Of course, the Wall Street Einstein's unanimously proclaim that this is the current state of affairs right now and any softness in the claims data will improve going forward. We will find out who is swimming naked as the weeks play out.

Claims bottomed in mid-September 2018. We are in mid-February 2019. That's 5 months. Interesting. Claims are rising for 5 or 6 months indicating that a recession is likely coming a lot faster than anyone expects. Perhaps the drastic drop in Retail Sales reinforces this trend forward?

Claims are at multi-decade lows the lowest since the late 1960's and early 1970's. Back then, Keystone sported a tie-dye tee shirt with a peace symbol on it, long hair past the shoulders and grooved to the rock and roll sounds of Led Zeppelin. The 70's was the best decade in America's recent past far better than now.

Back on point, companies do not lay off workers in strong economic times, hence, claims are low. However, the Federal Reserve and other central bankers have destroyed all price discovery over the last decade so no one knows what anything is worth anymore as well as the impact to years of economic data. The low claims numbers may actually reflect the ongoing weak economy, for years only propped up by central bankers that are protecting the wealthy that own large stock portfolios. Companies hang on with their bare-bones staff levels but as the business activity and sales remain soft, they finally give-up and close the doors. If they cut any more employees, the business cannot function. Perhaps we are seeing the end game where business owners say to H*ll with it all and permanently close the doors. Claims rise.

The green downward-sloping channels show economic and market joy. Claims are falling during this period representing economic positivity. The wine is flowing like water and everyone that wants a job can typically find work, although it may be for a big cut in pay. The economy and markets are boosted over the last decade by the Federal Reserve and other global central bankers, all acting in collusion, to keep the stock market party going to reward and protect the wealthy elite class.

The red upward-sloping channels show the trend change ongoing. Five months ago, claims bottomed and have been moving higher ever since (there is the one bleep lower at the end of last year). This upward move in claims creates the rising 4-week moving average. Generally, the economy and markets are great when the 4-wk MA is dropping but sad when it is rising.

The 4-wk MA on the claims chart has a H&S (head and shoulders) pattern vibe to it. A head at 208K and neckline at 228 would boost the 4-wk MA to 248K-250K should the H&S play out. That would get everyone's attention.

The claims numbers just went from a laissez-faire who-cares weekly data release to an extremely critical and key employment data point each week. Watch the numbers closely and note the progress of the charts above. Claims are released every Thursday morning at 8:30 AM EST. Be there or be square as we said in the 70's. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note: The FRED chart is from the St Louis Fed that provides a lot of useful data and charts to the public. The Claims and 4-Wk MA chart is provided by Econoday, a great site to view the economic calendars, and they work in conjunction with Haver Analytics.