Jobless Claims Spiking...Should We Worry?

Back in September, I wrote a blog titled: Beware of Jobless Claims Below 300,000. In it, I showed that, historically, when claims fall below 300,000, a recession is almost sure to follow.

Well, interestingly enough, we just had a big spike in jobless claims which are now back above 300,000.  So, the question is: Is this jump signalling the possible start of a recession.  The reason I say this, is because it is rare to see such a big jump in layoffs before a big holiday like Thanksgiving.  Normally, employers do everything possible to avoid giving people notices at those time.  It can be a heartless thing to do.

With that in mind, please look at this chart from the people at Zero Hedge:

Now, look at the historical Jobless Claims from St. Louis Federal Reserve:

Click on chart to zoom in

Note, the similarity in the spike in claims just before the start of each recession.

This doesn't mean that a recession is necessarily imminent. Usually it takes a few weeks to develop, but if jobless claims continue to develop an upward trend, it may be that this latest number is the canary in the coal mine.

One last thing.  Normally, the claims number that follows a holiday will be low because (1) claims offices are only open a few days in that reporting period and (2) because less people are available during holidays to file claims.  Therefore, next week's jobless number should fall dramatically.  But, if not, we could be seeing the start of a new recession.

References:

Initial Jobless Claims Spikes Above 300k To 3-Month Highs, Biggest Miss In 11 Months: http://www.zerohedge.com/news/2014-11-26/initial-jobless-claims-spikes-above-300k-3-month-highs-biggest-miss-11-months

FRED: 4-Week Moving Average of Initial Claims: http://research.stlouisfed.org/fred2/graph/?id=IC4WSA,