Monday, June 09, 2008

Adjusted for the Growth in the Labor Force, Today's Jobless Claims Are BELOW AVERAGE!


From today's "The Gartman Letter": Amidst all of the talk of rising weekly jobless claims being so egregiously large, let us try to put what has gone on thus far in historical perspective: Jobless claims are modest, at worst, compared to past periods of protracted economic weakness. Average weekly jobless claims are hovering around 350,000. In the recession of 2001 they bottomed at or near 470,000. In the recession of 1990-91, they bottomed at or near 500,000 (see top chart above, click to enlarge).

These last two recessions pale, however, when compared to the truly difficult recessions of the 1970s and 1980s. For example, in the recession of 1981-82, initial jobless claims rose to a stunningly high 680,000, while in the short but severe recession of 1980, claims touched 620,000. In the Arab Oil Embargo "inspired" recession of 1972-74, jobless claims rose to 550,000.

We shall not argue that claims will not move higher than where they stand presently, for almost certainly they shall. But let us keep things in perspective. Back in the mid-1970s the US population was approximately 215 million; now it is 303 million, or 140% of what it was. Thus the 550,000 "claims" in the recession in the early 1970s would be the rough equivalent
of 775,000 now, and we are but half of that. Today's "claims" are bad, and for those making the claims they are horrid, but in the great scheme of things they are modest... indeed, surprisingly so.

MP: The top chart above shows initial jobless claims (4-week moving average) and the civilian labor force from 1987 to 2008. The labor force has increased by 30% since 1987, so the frequent comparisons of today's jobless claims of around 350,000 to previous periods and previous recessions is biased and flawed, as Dennis Gartman suggests.

The bottom graph above (click to enlarge) shows initial jobless claims as a percent of the labor force, to adjust for the increase over time in the population and labor force. May's 0.238% level (368,500 claims / 154,534,000 labor force) is below the 0.27% to 0.33% range of the last recession in 2001, and way below the 0.30% to 0.40% of the 1990-1991 recession.

Using the percentage from the first month of the last recession (0.26646% in March 2001), and the current labor force of 154,534,000, jobless claims today would have to be close to 412,000 before the current economy would in as much trouble as the economy in March 2001, when the last recession started. Further, today's level of 0.238% is actually below the .257% average since 1987.

9 Comments:

At 6/09/2008 2:47 PM, Anonymous Anonymous said...

repug shill think.

 
At 6/09/2008 3:04 PM, Blogger juandos said...

"repug shill think"...

Yes! More parasitic libtard whining... LOL!

 
At 6/09/2008 4:04 PM, Anonymous Anonymous said...

Average shmaverage I'm resorting to good old fashioned hoarding as a hedge against inflation.

 
At 6/09/2008 4:45 PM, Anonymous E. Harokopos said...

What I see in these charts and care most about is the nice correlarion with stock market performance in the longer term. Actually, I will start investing using the claims as an indicator. Rising claims means market still has room to go down. Bottoming claims signal market rise. Maybe a moving average crossing will do a better job.

Maybe I will be able to beat buy_and_hold.

Thanks for the charts MP.

 
At 6/09/2008 4:48 PM, Anonymous Anonymous said...

What no mention of the hidden unemployed who have "given up looking" for work.

After years of the "jobless recovery" and limitless predictions of recession by economists like Paul Krugman (ironically, he missed the actual recession in 2001), isn't it strange how the earth seems disinclined to open up and swallow us all whole?

Looks like an epidemic of Bush derangement syndrome. The cure will hopefully arrive in Nov. unless the unthinkable happens. It might almost be worth getting the Democrats to end the perpetual gloom....almost but not quite.

 
At 6/09/2008 9:59 PM, Anonymous Fred said...

Poor Dems are still runingg against Bush by nonsense like calling McCain "Bush's third term."

Dems lost to Bush in 2000.
Dems lost to Bush in 2004.

Here it is 2008 and the Dems want to run against Bush again? Insanity is doing the same things over and over while expecting different results.

 
At 6/10/2008 3:25 AM, Anonymous Ringold said...

anon 4:48pm:

Nice rant, but hey, don't let labor force participation rates get in the way of a nice Marxist capitalist reserve army rant.

to everyone else:

How, exactly, did MP create the charts? $5 via PayPal (or however) or 100m Eve Online ISK to who ever wants to email me the procedure to my name @gmail.com. For an econ major, my excel skills leave something to be desired..

 
At 6/10/2008 4:22 AM, Anonymous Anonymous said...

What's with the fixation on initial claims as an indicator of recessions?

Private payroll employment peaked December 2007;
Real retail and manufacturing sales peaked September 2007;
Industrial production peaked January 2008;
Real personal income less transfers is basically flat since December 2007;
Monthly GDP, according to Macroeconomic Advisors, peaked January 2008.

Those are the five primary indicators used by the NBER business cycle dating committee to determine peaks and troughs in the economy.

Seems to me that a recession commenced December 2007.

 
At 6/10/2008 5:28 PM, Blogger Marko said...

Things are not so bad, for the economy, but they suck for people that don't make tons of money. Welcome back to the real world!

Why do people just assume things will always be great without any setbacks? I guess because for the last 25 years things have been really great. Remember the people that would not leave New Orleans even though they were ordered to evacuate? That's the reason you need to work hard and earn lots of money - so you can handle this kind of stuff.

Next time somebody is whining about the gas prices, ask them why they can't afford gas? Is it because being an accounting or business major in school was too boring? Were they hoping to get an overpriced union job? Did they think a guaranteed government job sounded easy?

Sorry, I am just venting.

 

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