Are The Weekly Initial Claims Manipulated?

The weekly Initial claims were released  today, and the report came in at an “unexpected” 439K vs a consensus of 376K (prior revised 361K). Below is a chart of the initial claims from the last few months with the 4 week moving average. As you see, we saw a major spike today.













OK, I Lied. That is not the chart from today. That chart, is from 2005, a few weeks after Hurricane Katrina hit. As we see, we saw a spike in initial claims due to the storm. This was expected. A spike was coming (don’t ask me why analysts had consensus at 376K…that is why we need more Estimize-type sites).

Here is a great chart from Avondale Asset Management. Shows what happened last time it hit.  As you see we saw a spike, only to return to normal a few weeks later.














Now, the reason I am writing this post is because I saw tweets on how the data was manipulated, which is a completely ludicrous  Now, you can argue if the the data collection method is flawed or whatever, but to say the data is manipulated is outright ridiculous. Here is why.

But before I get into that, I just want to go on the record and show that I do not “root” for any side  Here is proof. When the Initial Claims came in at 342K for the week of October 6, I was wary of that number because it was a pretty big deviation from the 4-week Moving Average. As we know, initial claims are VERY noisy as evidenced by this YoY chart.

Here were my tweets. I was dubious about the bullishness of the number.























So why is the data not manipulated?

1) We are a Democracy. Now we can argue to what extent that is true, but to argue that President Obama somehow has either the power (either by choice or by force) to manipulate the data goes against everything we believe in and that the entire system is a farce. Quiet frankly, this is almost un-American and implies that a dictatorship-type government is at work propagandizing the data.

2) The people collecting most of the government economic data that is reported likely work for the highly professional BLS or DOL.  These guys are career officials who were probably hired during different presidential terms (and not by the sitting presidents, this is not the SCOTUS). There are 17,477 workers in the DOL and 2,500 in the BLS. To say they can keep this secret ‘conspiracy’ under the wraps is preposterous. Have you never told a friend or family member a secret only to find out that some other friend/family member knew? Imagine doing that with thousands of people!

3) Pick a side! Initial claims fall much more than expected (like for week of Oct 6) and people say its manipulated. Initial claims rise much more than expected (like for last week) and they say its manipulated. What? Won’t the manipulation work in ONE direction?

4) Why stop if it’s manipulated? Argentina does a good job at it. Why would Obama (or whoever is ordering the manipulation) stop now? By manipulating the data, he could become the greatest president ever!

5) It’s been tried before and failed. Nixon tried to remove the “Jewish cabal” that was’ manipulating’ the data negatively.

One last caveat before I finish. Initial claims can jump like this if we are going into a recession. However, the evidence that we are in a recession right now (or about to go into one) is small. Put me in the camp that says this is an outlier that is likely to return near its 4 week mean before Christmas (383K as of this week). Of course, the elevated readings will push the 4-week average higher in the short term, but it should normalize by the end of the year.


 Tags: $MACRO $FED

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Jerry Khachoyan Blog