by Calculated Risk on 11/02/2006 10:35:00 AM

Last week Tim Duy commented on the current Fed thinking:

"I believe the risk of a hard landing is not insignificant, but recent data does not point in that direction. We are not seeing the hallmarks of a hard landing such as collapsing core durable goods orders, rising jobless claims, or plummeting consumer confidence. Without those signals, the Fed will stick to the soft landing story. Consequently, the Fed is not likely to view 3Q06 report as disastrous; they will view as in line with their expectations." emphasis added.

Here is a look at weekly unemployment claims and recessions - from the Dept of Labor:

In the week ending Oct. 28, the advance figure for seasonally adjusted initial claims was 327,000, an increase of 18,000 from the previous week's revised figure of 309,000. The 4-week moving average was 311,250, an increase of 5,750 from the previous week's revised average of 305,500.

Click on graph for larger image.

This graph shows the 4-week moving average of weekly unemployment claims vs. Recessions. Usually claims are rising prior to the onset of a recession.

For the 2001 recession, claims were just above 300K per week in early November 2000, and the recession started in March 2001. This is something to watch, however there is a question of how many construction workers will be eligible for unemployment, since many are "cash workers" or individual sub-contractors - so unemployment claims might not be as good a leading indicator of a housing led recession, compared to prior recessions.