Saturday, August 21, 2010

Adjusted Jobless Claims Update

It's been a few months since I featured this pair of charts above showing: a) jobless claims vs. the labor force, and b) jobless claims as a share of the labor force, both updated through July (BLS data here and here), and updated now with c) jobless claims as a share of civilian employment (see chart below).

The top chart shows why unadjusted jobless claims are meaningless: the size of the U.S. labor force has almost doubled over the last 42 years, from 77.57 million in 1968 to the current level of more than 153 million. The bottom chart shows jobless claims adjusted for the size of the U.S. labor force. Jobless claims averaged 458,250 in July, which is 0.2984% of the July labor force of 153,560,000, and is close to a 21-month low (lowest since August 2008). Jobless claims as a percent of the labor force have declined in 14 out of the last 16 months, starting in April 2009.

This measure of initial jobless claims, adjusted for the increasing size of the U.S. labor force over time, 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 to the levels of the previous three recessions in the mid-1970s and early 1980s, and about the same as the 1969-1970 recession. The sharp reduction in adjusted jobless claims from the March 2009 high of 0.415% follows the same pattern of sharp reductions at the end of each of the last six recessions.

Bottom Line: Adjusted jobless claims in recent months are at about the exact same levels as during the last two post-recession expansions in 1992 and 2002 (see red line in the bottom graph). See update below, featuring jobless claims as a percent of civilian employment instead of the labor force.


At 8/21/2010 11:16 AM, Blogger morganovich said...

it seems to me that a better comparison would be % of people working, not overall labor force.

this recession has seen the % of americans employed drop to lower levels than past recessions. such people cannot file for initial claims and even get flushed out of reported unemployment (u3) once the become "discouraged".

in a recession with a lower % of workers to population (such as this one) initial claims will better compared to workforce because the % of the workforce actually working is lower, meaning that the initial claims are a bigger percentage of actual workers. saying that someone without a job has failed to file for initial claims is essentially meaningless when assessing the health of the labor force.

the employment to population ratio bottomed at 62% in 2003 and about 61.5% in 1993. we are currently in the low 58's. an additional 3-3.5% out of the workforce is not a small deal. (consider the difference between 9.5% unemployment and 6-6.5%)

true, we have not hit the troughs in employment to population seen in the 70's, but i would argue that there has been a fundamental change in the workforce since then as more households got 2 breadwinners and that we are unlikely to see a return to such low levels for structural reasons.

i'd be interested to see how much a change in denominator affects these numbers.

given how much longer and deeper this downturn has been (and how shallow the recovery) i am finding it difficult to see how we can describe the current situation as typical.

this chart shows all the recessions since ww2. if you take out census hiring (dotted line) you can see how anemic this recovery is. there is not a single other recovery that looks less like a V than this one 7 months from trough.

those unemployed for over 26 weeks are nearly double the previous record as a % of workforce and nearly 3 times the levels seen in 92 and 2003.

"part time for economic reasons" workers are also at a post ww2 high.

none of these seem typical or positive to me.

At 8/21/2010 12:20 PM, Blogger Marko said...

It seems to me that old Ronnie Raygun's massive income tax cuts and domestic spending cuts lead to an extended period of unprecedented prosperity. The creeping increases in overall taxes and massive increases in government spending are finally taking their toll, however. It is time for another Reagan Revolution. Throw the bums out and this time amend the constitution to limit federal spending to a low % of GDP, and limit the taxes anyone pays on income to a low %, or perhaps put in some kind of low flat consumption tax for good. It is about time that government was forced to live within our means.

At 8/21/2010 12:54 PM, Blogger morganovich said...

thanks for the chart mark. much appreciated.

not wildly different, but it does seem to eliminate some of the difference between our current level and the peaks of recent recessions. i doubt there is any statistically significant difference between current levels and the 2003 peak.

i'll be interested to see how it tracks over the next couple weeks as the most recent claims numbers are up about 9% from the july average which would seem to be pushing us back up toward the 2003 peak.

of course, this number by itself is only half the story. job creation is the other half, and we do not appear to be seeing any uptick in the employment/population ratio yet.

this is just a though and i have no idea what the answer is, but what are the requirements to be an initial claim? is it possible that either more people are eligible (increased benefits etc) and it is driving the number up or that fewer are (due to short tenure or part time work or having been on benefits in the last X months).

i'm wondering if there have been either legal changes that affect the comparability of these numbers or a change in the complexion of the workforce/employment history that has altered the % of those losing jobs who apply for benefits.

issues like those can make these statistical series tricky.

again, i have no idea if there is any meaningful influence by such factors here, but if anyone has some data, i'd love to see it.

At 8/21/2010 1:21 PM, Blogger juandos said...

Mort Zukerman over at US News isn't nearly as optimistic: Mort Zuckerman: Unemployment Rate Is Worse Than It Looks

At 8/21/2010 2:09 PM, Blogger marmico said...

The unemployment rate has been 9%+ for 15 consecutive months. The last time this happened was the 19 consecutive months ending October 1983.

I sniff a record to be broken this December. Are you taking the over or the under, morganovich?

Yes morganovich, the UI recipiency rate fell through 1984 and has been relatively stable since. The exhaustion rate is now at a data series highs. Lotsa data for chartists here.

At 8/22/2010 9:11 AM, Blogger juandos said...

Hmmm, how 'adjusted jobless claims update' be affected by inane federal interference in the jobs market?

At 8/22/2010 11:45 AM, Blogger morganovich said...


frankly, i think trying to call u3 right now is sort of a sucker bet. it all depends on how many people they shunt off into "discouraged" etc.

if we are talking about a broader measure like u6, then i am quite confident we are going to exceed the '83 record. we are already deep, deep into post ww2 record territory on long term unemployed. that's not going to shift easily.

At 8/23/2010 2:03 AM, Blogger sethstorm said...

morganovich said...

I'm one of them. Not really liking it, especially when the lack of employment leads to more of a lack of employment.

Discouraged? More like frustrated at the excuse of "regime uncertainty" and seeing plenty of attempts to wait-out & starve people. Frustrated that the unemployed are now being "swept under the rug", having future opportunities held hostage. Frustrated that qualifications are being maximized as a opportunistic HR move.

If it takes a second coming of FDR's other measures, so be it. However, it would be far nicer to not have to use the heavy weaponry. It would only make the private sector worse off and more antagonized.

Hmmm, how 'adjusted jobless claims update' be affected by inane federal interference in the jobs market?

Aside from the oil company hijinks for which I don't like either:

Start acting in ways that don't invite people to regulate. Or pursue. Stop trying to contract away people and wonder why blows up in your face.

It's that simple. Be profitable, create jobs, bring the long-term unemployed back into secure work, perform well in spite of what's going on. All at the same time.

Oh, and don't hit up the government for special treatment against the unemployed.

By the way, while I can't support "regime uncertainty", I can understand its effects get worse the further they trickle down. I hope you do as well.


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