Archive for January, 2011

Don’t believe the Unemployment Claims hype today!

Thursday, January 27th, 2011

Today’s headlines were full of doom-and-gloom about an “unexpected” “surge” in weekly “unemployment claims”.  But the data presented are seasonally adjusted and the actual, not-adjusted data show no surge at all!What really happened was an inexcusable error in seasonal adjustment.And I’m disappointed that out of the various news and commentary sites I’ve looked at today, no one, so far, has questioned the seasonal adjustment factors.The ACTUAL claims data are not so bad.  From the official News Release:”The advance number of actual initial claims under state programs, unadjusted, totaled 482,399 in the week ending Jan. 22, a decrease of 67,491 from the previous week. There were 502,710 initial claims in the comparable week in 2010.”So, claims are falling week-by-week (normal for January) and claims last week were lower than in 2010 (normal for an ongoing economic recovery).For context – the numbers from the comparable weeks of January 2009, in the depths of the recession, were far higher (620-760,000, depending on which week one chooses to “compare” with).There is always a surge in actual unemployment claims in early January, due to holiday and other seasonal labor layoffs, turnover at firms that have annual staffing changes, and so on.  But the exact pattern, of which weeks see the most claims, can vary from year to year … without being a source of panic.For more context, from the official site, here are the full sets of January 2010 and January 2011 *actual* claims numbers (no massaging):For 2010:01/02/2010:  645,446 01/09/2010:  815,59301/16/2010 652,32701/23/2010: 502,71001/30/2010 533,32002/06/2010 507,634 For 2011:01/01/2011:  578,90401/08/2011:  773,49901/15/2011:  549,89001/22/2011: 482,399The astute reader will note that for each week, the actual (not “adjusted”) claims this year are FEWER in number than for 2010.  After the January seasonal pattern ends, the claims will bottom out in the low 400,000s.  The overall level is still somewhat elevated relative to a booming labor market (where claims would bottom in the 300,000s), but there’s no sign of the economic recovery having derailed this January.One might also anticipate, based purely on supply/demand grounds, that unemployment claims should remain elevated above “boom” levels so long as the extended benefits are available, the overall unemployment rate remains high, and high-quality job openings remain scarce.  The incentives and rewards facing newly-unemployed workers are not the same now as they were during the prior boom (or even the prior busts!).  Some fraction of recently-unemployed workers may be more inclined to take the benefits (and then retire early, in the case of some of the baby boomers?) than to accept one of the available jobs.  During a boom I suppose those workers would swiftly be rehired and might even prefer not to file claims at all.