Black line: seasonally adjusted new claims for unemployment insurance, weekly since January. Blue line: average of 4 most recent weeks as of each date.

That ongoing drop in the 4-week average is noteworthy because in each of the last 5 recessions, once the new claims number began declining from its peak value reached during the recession, the NBER subsequently dated the recovery from that recession as beginning within 8 weeks.

Black line: 4-week average of seasonally adjusted weekly initial claims for unemployment insurance, from Department of Labor via Webstract. Vertical lines: first week of the first month of a business cycle expansion as subsequently dated by the National Bureau of Economic Research.

Reasoning as in my last discussion of these data, one can try to judge how meaningful the latest numbers might be as follows. If we leave out the 1970 recession, there are 230 weeks in which the NBER declared the economy to have been in recession during the 5 recessions of 1974, 1980, 1982, 1990, and 2001. In 22 of these weeks, we saw as big a drop as we’ve seen this month, namely, the 4-week average dropped by more than 3.3% over a 3-week period. Of these 22 favorable readings, 11 turned out to be part of the final move out of recession, while in the other 11, new claims turned back up to reach a subsequent higher peak. Thus, if all you had to go on was the data on new unemployment claims and its behavior in previous recessions, you might conclude that there’s a 50% chance that an economic recovery will have started by the beginning of June.