Initial Claims Update

FRED:ICSA   Initial Claims
Today's read (not accounted for in this chart) is starting to make this a bit worrying. ICSA rising again week over week, threatening to break momentum. ICSA is a noisy indicator, but if you simply add smoothing with a moving average calculation, it becomes a better version of the unemployment rate. I say it's better because it's not subject to data issues such as workforce participation rate or other such issues that may skew the data a bit. Beyond that, ICSA leads the unrate from a data perspective, so it's a bit more of an advanced indicator.

For this indicator, I like to use the 52 week (1 year) EMA and the 26 week (1/2 year) EMA to smooth things out. This HAS crossed in the past 10 years temporarily during some big unemployment swings from hurricanes. So it's important to understand those as just temporary false signals, and not anything real going on with the economy. Right now however, we clearly have no hurricanes going on, and we're getting very close to a cross, which is a pretty damn good sell signal.


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