by Calculated Risk on 1/25/2007 10:51:00 AM

Here is a bad headline from the AP: Jobless claims rise to 16-month high.

The U.S. Department of Labor reported:

In the week ending Jan. 20, the advance figure for seasonally adjusted initial claims was 325,000, an increase of 36,000 from the previous week's revised figure of 289,000. The 4-week moving average was 309,250, an increase of 1,500 from the previous week's revised average of 307,750.

Just 4 weeks ago claims were also 325,000, and in the last week of November, claims were 358,000. So why is this a "rise to a 16-month high"?

The AP is referring to the increase in claims from last week.

The Labor Department reported Thursday that 325,000 newly laid-off workers filed claims for jobless benefits last week, an increase of 36,000 from the previous week. That was the biggest one-week rise since a surge of 96,000 claims the week of Sept. 10, 2005, when devastated Gulf Coast businesses laid off workers following Hurricane Katrina.

Why does anyone care? Weekly claims are notoriously noisy week to week, so everyone follows the 4-week moving average.

Click on graph for larger image.

This graph shows the weekly unemployment claims and the 4-week moving average vs. recessions since 1989. The dashed line at 350,000 is the level of concern for the 4-week moving average.

Currently the 4-week average is 309,250; not a concern.