Adjusted Jobless Claims Suggest Recession Ended
August employment data was released yesterday, and the graph above of Initial Jobless Claims as a Percent of the Labor Force (1974-2009) has been updated to reflect the August labor force of 154,577,000 and the August average for initial unemployment claims (568,900 for the 4-week moving weekly average). This measure of initial jobless claims, adjusted for the size of the U.S. labor force, shows that jobless claims peaked during this recession above the levels of the last two recessions (1990-1991 and 2001), but were never anywhere close the levels of the previous three recessions in the mid-1970s and early 1980s (see chart above). In other words, this recession was worse than the last two, but not nearly as severe as the previous three, using this adjusted measure of jobless claims. Additionally, the sharp .056% reduction in adjusted jobless claims from the March 2009 high of 0.4226% to 0.3662% in August follows the same pattern of .05% reductions in adjusted claims at the end of the 2001 recession (a .052% reduction from .3318% in October 2001 to February 2002) and at the end of the 1990-1991 recession (a .058% reduction from .3915% in March 1991 to .3327% in July 1991).
Finally, the current level of 0.3662% for jobless claims as a share of the August labor force is above the level at the end of the 2001 recession, but is very close to the levels that marked the ends of the four previous recessions (see dashed blue line in graph above).
As Scott Grannis reported last month, this type of reduction in job losses as a percent of the workforce suggest that the recession probably ended in June.
1 Comments:
This is irrational. Why would you want to take this ratio? We already have a perfectly good measure called the unemployment rate which is the number of unemployed (a stock) divided by the labor force (a stock). You're dividing a flow by a stock.
The data for unemployment and the labor force are gathered simultaneously in the same survey. That is an important factor of measurement error control. Unemployment claims come from separate sources - employment departments from different states with different rules of eligibility, different benefit scales, and different bureaucracies and wait times. Many unemployed are actively seeking work but are not entitled to or do not choose to claim unemployment insurance. Eligibility rules and compensation rates change from year to year - the survey methodology for unemployment rates (basic U3) haven't changed much at all and when it has the series was corrected.
I see no point to this. No point at all. The unemployment rate is the best measure. It is rising and will continue to rise for another six months to a year.
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