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Rising Initial Unemployment Insurance Claims Bodes an Economic Downturn
Raymond Richman, 1/20/2014

Once again, there are grounds for concern that we are experiencing a downturn in economic activity and may headed for an Obama recession. The advance number of actual number of initial claims totaled  534,431 during the week ending January 11, 2014 an increase of 51,190 over the previous week. During the preceding week ending January 4, 2014, an increase in initial claims of 34,384 was reported and in the week ending December 28, 2013, an increase of 25,875 was reported.  This increase in the number of claims was not reported in the media.

The media reported the BLS “seasonally adjusted” estimated of initial claims which reported a decrease of 2,000 in the number of initial claims. We consider the seasonally adjusted figure as unreliable. For weekly data, there is no good reason for a seasonal adjustment. But that is what the BLSs reports and the media publish. We consider that to be a great disservice to the community. 

In the last few months, one sees a steady deterioration in the employment data. Starting from a relatively good showing of 229,485 to 255,110 initial claims in September, one observes a range of 311,516 to 368,832 in October and November, and, with the exception of the week of 12-28-2013 when 397,667 was reported, a range of 414,002 to 534,431 in December, 2013 and January, 2014. The trend is unmistakable and does not bode well for the future of the economy.  Following are the data:

2013-09-07   229485

2013-09-14   272953

2013-09-21   255110

2013-09-28   252229

2013-10-05   336138

2013-10-12   360714

2013-10-19   311516

2013-10-26   323130

2013-11-02   331351

2013-11-09   363506

2013-11-16   325879

2013-11-23   368832

2013-11-30   321269

2013-12-07   462198

2013-12-14   414002

2013-12-21   417638

2013-12-28   443513

2014-01-04   486033

201401-11    534431

As we suggested a number of times, we should seek corroborating evidence in other indicators before making predictions. There are a number.

First, Obamacare represents a huge tax on the middle class to pay for the health subsidies to those with incomes less than about $90,000 (a majority of households), to pay the premiums of those with pre-existing conditions, the “free” coverage of young people under 26 residing with their parents or in school, compulsory coverage for abortions and contraception, compulsory coverage for AIDS and other life-style-caused illnesses, and the huge cost of administering the program.

Second, Federal Reserve System’s anticipated reduction in the rate of money creation which is likely to cause a decline in the stock markets and other assets (including houses). Any precipitous decline in asset prices, will have financial effects like the bursting of the housing bubble in 2008, although the banks are likely to be less vulnerable than they were then.

Third, the Obama administration’s tolerance of the unemployment-creating foreign trade deficits and its encouragement of the expansion of free trade areas which threatens greater trade deficits, decline of American manufacturing and manufacturing employment.

Fourth, compelling utilities to buy high-priced wind and solar energy which is, in effect, a tax on consumers of electricity.

Fifth, increased regulations of businesses and the creation of a hostile business environment which make the U.S. relatively unattractive to new investors.

It may be too soon to head for the shelters but one is advised to keep an eye out for confirmation of this pessimistic outlook.

  

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]