28 weeks ago, on 23 September 2012, a new trend in the seasonally-adjusted number of new jobless claims filed each week began. That trend has been characterized by extreme volatility, affected by such factors ranging from California's inability to process large numbers of claims in early October 2012, the impact of Hurricane Sandy from early November through early December 2012, a carry-over effect from December 2012's fiscal cliff event that ran from mid-January through mid-March 2013. And for 30 March 2013, perhaps a spike from the new seasonal adjustment factors that were just introduced in the last several weeks.
Let's get into the fiscal cliff carry-over effect, which we're considering as a hypothesis for what we observe in the data. Here, approximately 500 publicly-traded companies issued special or extra dividend payments to benefit their investors, who were seeking to avoid the risk of having dramatically higher taxes imposed upon them after the end of the year thanks to the "fiscal cliff" political impasse in Washington D.C., where the absence of a deal would hike the tax rate on dividends from 15% to as high as 43.4% with the looming expiration of the Bush-era 2003 tax cuts.
At the same time, many investors also sold off stocks at the end of the year to avoid a similar tax spike for capital gains, whose tax rate was set to rise from 15% to as high as 23.8%. Stock prices fell in response to this kind of selling in two phases. The first phase began following the re-election of Barack Obama as U.S. President on 6 November 2012, which continued through 15 November 2012. This phase was then interrupted by the actions of U.S. companies to issue extra or special dividend payments following the close of business that day, the reaction to which initiated a strong rally in stock prices as it created an incentive to hold stocks - at least through the time for when those dividend payments would be made before the end of the year.
Political Calculations
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