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Friday, September 30, 2011

Weekly Initial Claims Numbers Down; What Does That Mean?

The advance figure for weekly initial unemployment claims, seasonally adjusted, DECREASED by 37,000 to 391,000 for the week of ending September 24th. 

How can we possibly be adding jobs when 300,000 or 400,000 people a week are getting laid off?  (Please continue reading; you will find the answer to this question.) 

What are initial claims?

Quite simply, they are the number of people in the United States who were laid off during that week or a recent week and who filed a initial claim for unemployment benefits.  This number does not include all of the people who stopped working during the week. 

Some people may not be entitled to unemployment benefits and they do not apply.  Some people quit; they are generally not entitled to benefits so they do not apply.  Some people may have been fired for cause (not showing up for work, drinking on the job, stealing or other "gross misconduct") and they do not apply.  Not all of the people who apply will get unemployment, but the "initial claims" number includes all who apply whether or not they get unemployment.

This number, reviewed over a period of weeks, is a good indicator as to how the job market (and the general economy) is doing.  When it is going up, the economy is in a lull or may actually be declining.  When they are going down, employers are less likely to lay off people and the economy is probably starting to cook.. or at least simmer.       
As of mid-September 2011, the previous week's number of claims was 428,000.  The four-week moving average, which rounds out numbers and removes some volatility, DECREASED over 5,000 claims, from 422,250 to 417,000.  Continuing claims in regular state programs DECREASED by 20,000.

This is really a good thing, right, that initial claims are decreasing?  

There is so much mis-information about unemployment and weekly and monthly claims numbers, and way too much attention is paid to these weekly and monthly variances.  Yes, it is probably good that unemployment claims have decreased, but one week of a significant decrease does not a trend make
First of all, these weekly claims numbers and the monthly unemployment/jobs numbers come from different sources. Secondly, weekly numbers need to be watched over a period of weeks to see a pattern, and even monthly numbers need to be watched over a time frame of a few months for any kind of trend. 

What is most disturbing to me, however, is not that there is so much disinformation out there, but there are so many people who don't know a thing about whatever it is they are writing about, in this case, employment and unemployment numbers, spend so much time trashing each other and pontificating on the Internet.  They say things as if they are "fact" and they don't seem to bother to check anything out, even if the information is easily obtainable.  (I debunk a bunch of myths and fallacies about unemployment here.)

Just a few facts on this week's numbers and on unemployment in general:
  • Officially, there are, as of the August 2011 figures released in early September 2011, about 14,000,000 people unemployed and actively looking for work.
  • According to the numbers released this morning, there are 6,900,000 people receiving unemployment benefits. 
  • People who have exhausted their benefits (the 99ers) are not counted among the 6,900,000 people receiving benefits, but, if they continue to actively look for work, they will be counted among the 14,000,000 officially unemployed.  (This is the biggest, most persistent unemployment myth I have come across.  If you keep looking, you are counted among the unemployed, even if you have exhausted your benefits.)
  • Both weekly and monthly numbers are revised over a period of weeks, but those revisions are not usually enough to change the trend. Weekly numbers will be revised over the next two weeks, but, usually the second to third week revisions are just about non-existent.
How can we possibly be adding jobs when 300,000 or 400,000 people a week are getting laid off? 
  • Even though approximately 400,000 people have filed first-time claims for unemployment every week for months and even though we have 14,000,000 unemployed, hiring continues.  
  • Even in the depths of the recession, about three to four million people were hired every month.  It's just not enough to keep up with the number of people who were laid off in 2008 and 2009, and it is not enough to keep up with new people entering the work force. 
  • Updates as of July 2012:  First time claims are now in the upper 300,000's and we now have about 12,700,000 people unemployed.
  • You can see current numbers of job openings, hirings, layoffs, and separations HERE as I interpret and summarize the latest JOLTS (Job Openings, Layoffs, Turnovers) survey.  
  • You can find the latest information about weekly initial claims HERE. 
  • Remember:  Even though about 380,000 people are getting laid off and filing initial claims for unemployment benefits every week, about 1,100,000 people a week are getting hired these days.   
Unemployment myths, mysteries, and fantasies: 

Continue here for some comments and questions about unemployment and weekly claims and my answers; all were posted at the MSNBC website

Topics I tackle include:
The drop in claims this week is due to the TeaParty!
It is impossible to determine the number who are unemployed.
The number of claims dropped because nobody is working anymore and people have run out of benefits.
There are more people unemployed than there were; I ran out of benefits so I am not counted.
Bush tax cuts worked; stimulus spending didn't.
The only jobs that the Democrats creates were the Census jobs.
Obama lost all of those jobs; Bush didn't lose any.
At 400,000 layoffs a week, we are losing 21 million jobs a year!

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