Unemployment claims may be giving the wrong signal

Unemployment claims are an important leading indicator of the economy. They tend to decline a few months ahead of an economic recovery (see chart).

The decline in claims of the past several weeks gives us hope that the labor market and the economy are mending.

But do not jump to conclusions says Northern Trust. Initial jobless claims may be distorted by seasonal factors based on prior history of auto industry layoffs. It is important to note that auto industry layoffs occurred sooner than expected and that the underlying trend of initial jobless claims is pointing south.

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