|Jobless Claims Suggest Recession’s End Could Be Near|
April 16, 2009, 12:01 PM ET
By Kelly Evans
Amidst all the data, models, and sophisticated tools that today’s economic forecasters have at hand, there’s one simple series with a pretty impressive track record for predicting when recessions are coming to an end: jobless claims, a weekly tally of how many new claims Americans are filing for unemployment benefits, released every Thursday by the Labor Department.
Jobless claims have risen sharply during this recession, but shown some stabilization lately. Last week, newly filed claims plunged by a seasonally adjusted 53,000 to 610,000 – which some cautioned was a quirk of the timing of the Easter holiday – and the four-week average of new claims fell by 8,500 to 651,000, the series’ first decline in three months.
Forecasters love tracking jobless claims because they’re a timely read on the labor market, but also because they have historically been a great way to determine when declines in economic activity are nearing an end.
Robert J. Gordon, an economics professor at Northwestern University who sits on the committee tasked with dating recessions, is one who finds enormous value in this series. Going back to the late 1960s, he has found that the four-week average of new claims peaks about a month before the declared end of recessions with remarkable accuracy.
As of right now, the four-week average claims series peaked at a level of 659,500 in the week ended April 4. If that number holds, based on the series’ past performance it would mean the recession ended somewhere between late March and early May....