Weekly claims back on track

Weekly claims for unemployment came in way below expectations, but that says nothing about the economy, since it is now clear that the unusual and unexpected rise in claims in recent weeks was an artifact of the seasonal adjustment process (it appears that April is a particularly hard month for the seasonals to get right—we saw a similar surge in April of last year that was subsequently reversed). Claims are back on track.

The first chart above shows unadjusted claims, while the second chart shows adjusted claims. In both cases the gradual downtrend in claims that we have seen for the past three years remains intact. (The purple line shows the 52-week average of claims to abstract from the seasonal adjustment process.) So the story with claims is that there is nothing new here: the labor market continues to gradually improve, and that means that the economy is likely also continuing to grow at a moderate pace. Most importantly, given the market's fear of an economic downturn (as reflected in the extremely low level of Treasury yields), there is no sign here whatsoever of any deterioration.