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Thursday, August 1, 2013

Weekly Unemployment Claims Decline Significantly: What does it mean?

Weekly unemployment initial claims decline significantly and hit a new low since the Crash.  Is this meaningful?
What do initial unemployment claims numbers mean?  Are they the same as weekly initial claims?  Why are they important?  HERE! 

Weekly unemployment initial claims decreased by 
19,000 this week to 326,000 after increasing 9,000 last week.  While weekly claims continue to fluctuate, they are still unable to break below a mid 300,000 range of claims, as is obvious from the chart below.  This is the lowest number of initial claims since the Crash, but it is only lower by 1,000 than the 327,000 claims reported in the week ending April 27, 2013. 

As is always true with weekly claims numbers, they are volatile, and we cannot tell if any increase or decrease is significant unless there is a trend over a period of weeks. 

First time seasonally adjusted unemployment jobless claims declined to 326,000  for the week ending July 27th, a decrease of 19,000 claims.  Since the first week of March, new weekly claims have remained in the 325,000 to 365,000 range for twenty-one out of the past twenty-two weeks.   


The four-week moving average # of claims, which smooths some of the week-to-week volatility, decreased by 4,500 last week after decreasing by 750 the week before.  It is now 341,250.  Initial claims continue now at about the same level that they were five years ago, in late 2007 to early 2008.  

(Even though the weekly initial claims numbers are seasonally adjusted, these numbers are always a bit volatile and should  only be analyzed in terms of a trend over a period of weeks.  See the graph below.) 

The chart above is one of the BEST charts for understanding and observing changes in the weekly initial claims numbers over time.  This year (red:  2013) and the past three years (blue:  2010green:  2011 and black:  2012) are marked in different colors.  You can see that, as a trend, first time claims for unemployment have declined from one year to the next, even though there are variations within the year.  Though the number of initial unemployment claims has been variable over the past three months, it has continued a downward trajectory.  

Be aware that:
  1. The graph above shows first time claims, so people who have continued to receive benefits or who have lost unemployment benefits are not counted in these numbers.  
  2. They are seasonally adjusted, so most variations caused by weather or holidays are already included in these numbers.  
  3. As these are weekly numbers, they are more volatile than the monthly numbers.
For the week ending July 13th, 4,695,366 people were receiving unemployment benefits under one of the programs that are available (regular state, federal extended unemployment compensation, or a few other smaller programs).  This was a decrease of about 154,140  overall claims since the previous week. The decrease was due mostly to a drop of 99,577 claims in the number of people receiving benefits in the Regular State program (the first 19 to 26 weeks of benefits).  The number of people receiving benefits under the Federal Extended Benefits program (the "Tiers") dropped about 50,000.

The number of regular state claims has been below
3,200,000 in seasonally adjusted numbers since February.  (At the peak of the Crash, in early 2009, about 6,500,000 regular state claims were filed a week.)  

About 1,200,000 FEWER 
people are receiving unemployment benefits now vs. one year ago.  We do not know what has happened to the people who are no longer receiving benefits; we do not know how many of those 1,200,000 people found employment, how many retired, and how many are still looking for work.  We do know that:

  • There are 1,610,000 more people reporting themselves as employed than a year ago.
  • There are  2,293,000 more non-farm jobs.  
  • We also know that a grand total of 51,864,000 hires have been made by employers between May 2012 and May 2013, the latest month for which numbers are available.  (Some people may have been hired more than once during the year, so the number of "hires" is generally higher than the number of people who have been hired.)  
  • However, according to the Bureau of Labor Statistics JOLTS (Job Openings, Layoffs, and Turnover Survey) for May 2013, we still have about 3.1 active jobseekers for every job opening out there. 
  • The percent of unemployed people receiving benefits is now 38.3% for the week ending July 13th.

From the current report:

In the week ending July 27, the advance figure for seasonally adjusted initial claims was 326,000, a decrease of 19,000 from the previous week's revised figure of 345,000. The 4-week moving average was 341,250, a decrease of 4,500 from the previous week's revised average of 345,750.
As usual, to put all of this into perspective, check out the red line on the chart above to see where jobless claims are now, in 2013, compared to the past three years.

First time unemployment claims decreased by 17,000 over those reported last week.  Last week's initial claims numbers were revised upwards by 2,000.  There are usually slight upwards revisions  (1,000 to 3,000) in the numbers of initial claims in most weeks.  (The chart above shows REVISED claims numbers.)

The initial claims as announced last week were 343,000, so the claims from that week were revised upwards by 2,000 to 345,000. 

Current Spring Initial Claims Continue to be the Lowest Since Late 2007/Early 2008.

As a whole, the current numbers of initial claims continue to be the lowest Winter-Spring initial claims numbers since late 2007/early 2008.

Continuing regular state claims in seasonally adjusted numbers, from people who are continuing to claim unemployment through the initial 19 to 26 week regular unemployment program, decreased by 52,000 for the week ending July 20th after decreasing by 120,000  the week before.  2,951,000 people filed continuing regular state claims in the week ending July 20th.  As a whole, continuing regular claims continue to decline slowly despite some individual weekly increases.  (There were 3,286,000 continuing claims a year ago.) 

Total number of people receiving unemployment insurance is a very low 38.3% of the officially unemployed for the week ending July 13th.  

The weekly report also tells us the total number of people who are receiving unemployment benefits.  For the week ending July 13th, 4,695,366 people were receiving unemployment benefits under one of the programs that are available (regular state, extended benefits, federal extended unemployment compensation, or a few other smaller programs).  This compares with 12,248,000 people who are unemployed in unadjusted numbers according to the monthly June unemployment situation report which was released Friday, July 5th.  Those numbers, showing that only 38.3% of the officially unemployed are receiving benefits, should make it clear that people do NOT need to be receiving unemployment insurance to be counted among the unemployed.  (This ratio and these two numbers are NOT seasonally adjusted.)  July monthly unemployment numbers will be released tomorrow, Friday, August 2nd.

Extended Benefits (EB) No Longer Available in any State

As of the week ending July 13th, only 806 people were still receiving Extended Benefits, as mentioned above.  A year ago, 13,207 people were receiving Extended Benefits.  As recently as April 2012, 412,411 people were receiving Extended Benefits.

Therefore, over the 15 months, 99.9% of the people who were receiving Extended Benefits are no longer receiving such benefits.  We do not know how many of these 412,000 people receiving Extended Benefits in April 2012 have found jobs, how many have another source of income in the family, and how many have nothing. 

To reiterate, while a decrease in the number of people FILING for initial claims is a good thing and indicates that fewer people are being laid off, a decrease in the TOTAL number of people getting unemployment insurance may only show that fewer people are eligible for unemployment insurance benefits.

Any questions or confusion, please leave a comment or email me!

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