Adjusted for the Labor Force, Initial and Continuing Jobless Claims are Far Below the 1970s and 1980s
With March employment data now available, the graph above of Initial Jobless Claims as a Percent of the Labor Force (1970-2009) has been updated to reflect the March labor force of 154,048,000, and the March average for initial unemployment claims (650,937 for the 4-week moving weekly average). That measure of initial jobless claims adjusted for the size of the labor force shows that we are currently above the levels of the last two recessions (1990-1991 and 2001), but still far below the levels of the previous three recessions in the mid-1970s and early 1980s. For current initial jobless claims to reach the peaks of the 1970s and 1980s of about .60% (see chart above), we would have to have initial jobs claims today of about 925,000, or 42% above current levels. By this measure of the employment situation, it seems unlikely we'll get anywhere close to the recessionary levels of the 1970s and 1980s.
A similar chart (via Charles Brady of the Fox Business Channel) and analysis was featured in today's The Gartman Letter (subscription required) of the "Continuing Claims as a Percentage of the U.S. Labor Force" (see chart below):
By that measure of the labor market conditions, we are still far below the 1973-1975 recession and the 1981-1982 recession.MP: The labor force has grown by more than 72 million from 81.98 million workers in 1970 to 154 million today, an increase of 88%. To compare unadjusted jobless claims (either initial or continuing) today to past periods is largely meaningless, without adjusting for the increasing size of the labor force over time (thanks to friend Dennis Gartman for initially making me aware of this deficiency). It's amazing how much attention gets paid to the unadjusted jobless claims, and how little attention gets paid to how meaningless these data are without adjusting for the size of the labor force.
4 Comments:
I have been a fan of these posts since you started doing them. However, it occured to me today that there is something missing from this story.
I do not know the UI literature well, so I couldn't tell you whether benefits are more generous today. But I do know the literature well enough to know that benefit generosity does matter, and that more generous benefits increase the number of claims.
So an important question must be answered to fully interpret these charts: are UI benefits, eligibility requirements, etc., more generous today relative to the recessionary periods of the 70's & 80's?
If they are more generous today, that would make your story that we're still not as bad as the 70s/80s stronger.
The 1970s are not comparable. It's called intertemporal changes to the unemployment insurance recipiency rate.
The only chart that matters is here. Plug and play. This is the worst employment recession since 1948. And, in 2 months, it will be the worst since Great Depression 1.0.
If nonfarm payroll employment losses average 276000 (663000 in March 2009) for the next 9 months, not a single net job will have been created this decade.
More and more data is coming out that this is not our Grandfathers' Great Depression. Just because it "feels" like it doesn't actually mean it is. There is an old saying that "when your neighbor loses his/her job its a recession.. when you lose your job it is a depression."
Look, Mr.Gartman is a great and very smart guy, but these figures are really not right. Go look at the part-time-for-economic-reasons series and adjust for population and/or work-force and you'll see what I mean: we're basically on part with the 82 recession. Furthermore, if we go another 3 months without turning the corner, it will have been the longest recession with increasing unemployment on record (aside from the weird long-but-shallow 2001 recession). You can find the relevant graphs on calculated risk.
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