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Why Is The Government Overrepresenting Raw Continuing Claims Numbers?

Tyler Durden's picture





 

One of the most recent statistical aberrations to be noted by Investment Research firm Oscar Gruss and subsequently referenced by Bloomberg highlights the dramatic disconnect between raw and seasonally adjusted continuing claims numbers. The divergence has manifested itself in a discrepancy of nearly 900,000 people. It is represented below:

From Bloomberg:

The pre-adjustment total dropped for the last nine weeks, the longest streak since May 2008. The number of claims fell by
1.05 million, or 17 percent, during the period. Adjusted claims changed direction on a week-to-week basis throughout the period and declined by only 113,000, or 1.8 percent.

Another way of visualizing the discrepancy is presented by Oscar-Gruss:

Furthermore, the key issue according to Oscar-Gruss' economists is the odd behavior of the 2009 data series which is a visible outlier compared to prior historical periods: the delta between unadjusted and adjusted hit a recent record, and to the downside at that.

And here is the proposed explanation:

“Our assumption is that the sheer brutality of the current cycle has caused the statisticians to cease to trust the ‘raw’
data and therefore fall into the trap of abusing the process of seasonal adjustment.”

Is the discrepancy merely a function of improving fundamentals catching up with the labor pool:

We would expect to see another “catch up” reduction in the “headline” seasonally adjusted continuing claim data in the coming weeks which will take claims down by somewhere between 400 to 500K based on the current data. We would also conclude that the pace of employment repair is running significantly faster than anyone relying on the “headline” seasonally adjusted data would be led to believe.

Yet keep in mind, in late 2008 and early 2009, the opposite was true, when unadjusted data was over a million higher than adjusted. Is the raw-to-adjusted ratio skew merely a function of the two data-series catching up on average with each other?

It would be odd for the government to present a cautiously bearish representation of economic reality here, while in all other economic data series it has not hidden its bias to promoting an upside case. Compare historical data revisions: what better way to indicate sequential improvement than by making just prior data look worse upon further "information" - this has occurred on far too many occasions over the past year.

Or is this merely a way for the government to provide "improving" numbers and thus stoke the market higher as the adjusted continuing claims number catches up with the raw number?

Alas, the simplest explanation is that while the rate of attrition could be slowing, it is not manifesting itself into any real economic improvement. Recall our recent presentation of the exhaustion rate, which hit an unprecedented 52% in the most recent data. This means that a whopping 52% of those collecting claims exhaust their benefits before they can find a job.

Combining the raw continuing claims data with the exhaustion rate presents a much more troubling picture: the raw data is "improving" due to the lack of material new "entrants", yet the lagging end of the curve keeps getting worse and worse.

This is yet another matter on which the BLS would be best suited to present their reasons for this divergence.

Lastly, it would be prudent to recall the interview with Charles Biderman of TrimTabs, who has for years been promoting the idea that the BLS continues to misrepresent the reality of the labor picture: be it raw or adjusted. One thing is for certain: with the U-6 unemployment rate breathing on 17% and soon likely to hit 20%, much of this speculation is merely semantics. The economy is still a long way away from not only stopping the labor bleeding but from actually reporting an uptick in employment. Until that happens, we expect that all bets are off when it comes to the government presenting the most optimistic possible case, even as more aberrations such as this become apparent.

 


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Tue, 09/29/2009 - 13:21 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

New claims = useless.

Continuing claims = useless.

U6 = useful.

Tue, 09/29/2009 - 14:13 | Link to Comment deadhead
deadhead's picture

+1

Tue, 09/29/2009 - 14:25 | Link to Comment VegasBD
VegasBD's picture

well said.

Tue, 09/29/2009 - 13:22 | Link to Comment gridlocked
gridlocked's picture

There are simply less jobs to cut now so of course the rate is expected to slow.

Tue, 09/29/2009 - 13:26 | Link to Comment Anonymous
Tue, 09/29/2009 - 13:26 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:24 | Link to Comment Anonymous
Tue, 09/29/2009 - 17:20 | Link to Comment Problem Is
Problem Is's picture

How do we know all the ANONYMOUS post are not one guy having a schizophrenic argument with himself...

Tue, 09/29/2009 - 13:29 | Link to Comment Veteran
Veteran's picture

Of topic but notice scuttlebutt is Douchie Dimon is rumored to be heading for the exits in the near future?  Rat leaving a sinking ship?

Tue, 09/29/2009 - 13:39 | Link to Comment Mos
Mos's picture

When all the banksters "retire" and start buying property offshore you know the end is near.  Just like Bush's massive ranch in Paraguay.

Tue, 09/29/2009 - 13:46 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:24 | Link to Comment Anonymous
Tue, 09/29/2009 - 15:58 | Link to Comment Anonymous
Tue, 09/29/2009 - 22:47 | Link to Comment Miles Kendig
Miles Kendig's picture

Sure.  Just like the Bush family's nearly controlling interest in the Corrections Corporation of America.

Wed, 09/30/2009 - 02:34 | Link to Comment handsfree
handsfree's picture

Congress has long ago given up all moral authority on this issue. But, go figure. When you lay down with whores, expect to wake up with STD's.

Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

good articles; good articles 4 slow news day ..http://www.. hat tip: finance news & opinion updated daily

Tue, 09/29/2009 - 14:25 | Link to Comment Anonymous
Tue, 09/29/2009 - 15:24 | Link to Comment Jean
Jean's picture

Had he bought in Argentina, I would have believed it. Paraguay, come on.

Tue, 09/29/2009 - 17:04 | Link to Comment Anonymous
Wed, 09/30/2009 - 11:09 | Link to Comment Jean
Jean's picture

No

Tue, 09/29/2009 - 17:24 | Link to Comment MortimerDuke
MortimerDuke's picture

I know.  Paraguay was so 2007.

Tue, 09/29/2009 - 13:33 | Link to Comment Anonymous
Tue, 09/29/2009 - 13:36 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:08 | Link to Comment Anonymous
Tue, 09/29/2009 - 16:57 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:14 | Link to Comment deadhead
deadhead's picture

thank you.  area of law please?

Tue, 09/29/2009 - 14:15 | Link to Comment Roy Batty
Roy Batty's picture

I'm seeing the same thing on the trading side. Just in the last 3-4 weeks I've had a lot of contact from headhunters, mainly for IR trading jobs (and no, not from the NYFR). The 12 months before that, nada.

Tue, 09/29/2009 - 15:32 | Link to Comment Jean
Jean's picture

I have had 2 job openings posted in multiple places, headhunters have besieged me. They are cutting their rates and hungry. (Still no qualified applicants)

Anecdotal accounts on this board (of all places) have no bearing on the greater economy. Let me know when truck drivers are in demand.

Has anyone tracked BLS stats to actual IRS withholding receipts?

Tue, 09/29/2009 - 17:01 | Link to Comment Anonymous
Tue, 09/29/2009 - 20:03 | Link to Comment Roy Batty
Roy Batty's picture

Maybe, just maybe, no one wants to work for you.  Just sayin'.

Wed, 09/30/2009 - 11:14 | Link to Comment Jean
Jean's picture

You have no idea ...

btw - I was fluffing up the guys by saying what happens here among the "elite" does not effect the great unwashed sea of humanity.

Still would like to see the real stats - income tax reciepts.

Tue, 09/29/2009 - 17:38 | Link to Comment Problem Is
Problem Is's picture

Wow. Another whole string of ANONYMOUS schizophrenia. Take your Haldol and stop talking to yourself...

Tue, 09/29/2009 - 17:38 | Link to Comment Problem Is
Problem Is's picture

Or sign up and get a name...

Tue, 09/29/2009 - 18:05 | Link to Comment Hephasteus
Hephasteus's picture

LOL They are trying to throw out stupid things and get people to side up.

Tue, 09/29/2009 - 13:37 | Link to Comment Steak
Steak's picture

Too bad our lives can't work the same way as GDP accounting.  Like when that majical moment comes when 300K people are fired and 300K+1 people get jobs.  The second derivative improvement will probably be enough to get us S&P 2000.  Of course its almost a dead certainty that the jobs created will be lower paying than the jobs lost.  But even then we can proclaim that the world has been saved again as wages decline at a less rapid pace. 

PS: I've never heard any media outlet (and I consumes a lot of media) reference the exhaustion rate.  It kind of seems like a big deal.  I'm ever grateful ZH is here to post it and ever spiteful that I'd never see it in a traditional media outlet.

Tue, 09/29/2009 - 14:04 | Link to Comment Lionhead
Lionhead's picture

Steak +1; this is exactly why I come to ZH for news that's just unavailable elsewhere. Seeing the anomalies on these charts more than confirms my basic distrust of any gov't data set.

As for GDP accounting, wait til the gov't adds the "human factors" to it such as access to healthcare, leisure time, etc.  More ways to obfuscate and dilute the quality of the data set so we'll all "feel" better about our declining wages, economy, and standard of living.

Tue, 09/29/2009 - 13:39 | Link to Comment Assetman
Assetman's picture

As incredible as it seems, the term "exhastion rate" remains totally outside the realm of MSM's lexicon.

When you have a decline in the continuing claims number, but still see initial claims rising by 400k-500k, well, you have a serious problem.  Chances are highly likely that more people are exhasting their benefits and falling off the headline statistics are greater than those actually finding jobs.

We won't stand a chance for a decent recovery until the "exhaustion rate" improves.  Period.

Tue, 09/29/2009 - 13:58 | Link to Comment loki
loki's picture

how does "exhaustion rate" get figured when benefits keep getting extended 13 weeks at a time?   I'm guessing lower exhaustion rate numbers.

MSM can't even say U-6, let alone calculate it.

 

Is "hours worked" more useful?

Tue, 09/29/2009 - 14:16 | Link to Comment deadhead
deadhead's picture

Not all states extend the benefits.

Many people have already used the extended emergency benefits and are off UI

Hours worked is a very good number to watch.

Tue, 09/29/2009 - 16:19 | Link to Comment cougar_w
cougar_w's picture

Here in CA unemployment and foreclosure are really high. Where I live (San Jose) there was an article today about how a homeless shelter with 250 beds, which turns away 20 people a night, is losing it's funding and reducing to 125 beds.

The state is bankrupt. I don't know what the benefits situation is for the unemployeed, but I assume any extensions will be phased out due to lack of funds just as end-of-the-rope supports are also vanishing. Those people (and entire families) are going to crater once the support framework implodes.

This is getting really bad. This is becoming a nightmare. I don't know where we go from here.

cougar

Tue, 09/29/2009 - 17:29 | Link to Comment Problem Is
Problem Is's picture

Extended benefits are almost always from a federal appropriation from Congress/the prez to your state. Very rarely does any state extend benefits on its own... Arnold cries to Congress for funds.

Obama's stimulus bill had unemployment insurance extensions in it. Congress will get going on another extenson shortly.

Unemployed people with no unemployment insurance checks make for some pissed off voters that vote out douche bag Congress people... which makes all of Congress by the way.

So an extension is strictly Congressional self interest...

Tue, 09/29/2009 - 22:49 | Link to Comment Miles Kendig
Miles Kendig's picture

Cougar.

I left the east bay and it is time you left the south bay.  Time is running out.

Tue, 09/29/2009 - 15:20 | Link to Comment Assetman
Assetman's picture

In this case-- and as incredible as it may seem-- you would be wrong in assuming the exhastion rate is going down.  It's actually increasing-- at that's a sad state of affairs when you think of many state extending benfits durations.

Hours worked is a pretty useful measure as well, though it tends to capture more of those who are actually working, but just cannot get to full time status.  You can have hours worked go down in a pretty mild recession, with nary a bump in exhaustion rates.

You're dead right about U-6, and it should be followed by EVERYONE.

Tue, 09/29/2009 - 13:43 | Link to Comment AN0NYM0US
AN0NYM0US's picture

from the piece above:

"It would be odd for the government to present a cautiously bearish representation of economic reality here, while in all other economic data series it has not hidden its bias to promoting an upside case."

 

can you spell "second stimulus"?

can you spell "mid-term elections"?

 

bad employment numbers are baked in everywhere - and the popular belief is that employment is a lagging indicator - note that even the President has highlighted that they will continue to go higher (as in the economy he inherited).

 

Just wait until Spring and employment will be the new Green Shoot right on through to November 2010.

Tue, 09/29/2009 - 16:27 | Link to Comment cougar_w
cougar_w's picture

I don't see how they can lie about the raw employment figures for too much longer. People do their own analysis by talking to the neighbors, and all the government will do is render themselves irrelevant if they keep cooking the numbers like this.

They are buying time, that's all. But 6 months more or less isn't going to change much. It's not going to get them past the Nov elections without having to stand tall for bailing out Wall Street while letting Main Street go bust.

I suppose they are counting on the unemployed and homeless not turning out at the polls. I wonder if that's how it works?

cougar

Tue, 09/29/2009 - 22:51 | Link to Comment Miles Kendig
Miles Kendig's picture

Failure to turn in your change of address with DMV will invalidate your voter registration.

Tue, 09/29/2009 - 13:56 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:25 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:26 | Link to Comment VegasBD
VegasBD's picture

I think we all know why.

Tue, 09/29/2009 - 19:40 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Don't want to cause a panic in the little folk, now do we?

The argument presented by the BLS and economists is that most people wouldn't understand that the month to month increase or decrease was simply "seasonal" and thus the raw data might cause undo concern in the sleeping masses. So the government helpfully evens out (they call it smoothing) the numbers.

See, I told you the government was here to help us.

Tue, 09/29/2009 - 14:09 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:28 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:47 | Link to Comment Handle with care
Handle with care's picture

What makes me very suspicious of ALL the unemployment numbers and also consumer spending numbers is the collapse in state taxes.

 

New York just declared that its tax take is now expected to be significantly worse than they thought just 2 months ago.  What happened to stabilisation?  What happened to the huge Wall Street bonuses?  And its still deteriorating faster than they can predict?

 

Of course, there's some increase in revenue losses due to write offs and falling incomes dropping people through tax bands in the progressive tax system, but the decreases in state taxes seem much higher than can be accounted for by the unemployment and sales numbers reported.

Tue, 09/29/2009 - 19:02 | Link to Comment Anonymous
Tue, 09/29/2009 - 14:51 | Link to Comment Anonymous
Tue, 09/29/2009 - 16:01 | Link to Comment Anonymous
Tue, 09/29/2009 - 15:16 | Link to Comment digalert
digalert's picture

How many times have I heard or read that data can't be compared to past due to "new accounting methods"? Someone is always changing the ways to count 1+1-1= X?

Tue, 09/29/2009 - 16:13 | Link to Comment TumblingDice
TumblingDice's picture

DEYTOOARJOBS!!!

Tue, 09/29/2009 - 18:07 | Link to Comment Hephasteus
Hephasteus's picture

Dey!!!! TOOK ARE JOBS!!!!!!

Tue, 09/29/2009 - 21:08 | Link to Comment Anonymous
Tue, 09/29/2009 - 17:12 | Link to Comment Anonymous
Tue, 09/29/2009 - 21:49 | Link to Comment Anonymous
Tue, 09/29/2009 - 17:16 | Link to Comment Anonymous
Tue, 09/29/2009 - 22:53 | Link to Comment Miles Kendig
Miles Kendig's picture

Compare that data set with sales tax receipts, especially at the county level and the picture clears considerably.

Wed, 09/30/2009 - 02:34 | Link to Comment handsfree
handsfree's picture

Intelligent service provision to customers to ensure and improve quality of service around algorithm-selection, execution quality, market structure, technical advice etc.

Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

good articles; good articles 4 slow news day ..http://www.. hat tip: finance news & opinion updated daily

Tue, 09/29/2009 - 17:27 | Link to Comment Anonymous
Tue, 09/29/2009 - 22:58 | Link to Comment Miles Kendig
Miles Kendig's picture

Time = 26 weeks.  Two extensions of 13 weeks are now in place for many.

Amount = Varies by state.  Most states have a max cap based upon wages of prior employment that equates to a maximum payment of about $575.00 bi weekly.

An interesting note is the tracking on the number of weeks it takes to get a claim approved and paid.  some folks are waiting for 6 months or more just to start receiving benefits.

Wed, 09/30/2009 - 00:00 | Link to Comment Anonymous
Wed, 09/30/2009 - 02:32 | Link to Comment handsfree
handsfree's picture

Good point here

Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.

good articles; good articles 4 slow news day ..http://www.. hat tip: finance news & opinion updated daily

Wed, 09/30/2009 - 07:22 | Link to Comment trader1
trader1's picture

please stop spamming with the same posts and your links on the various comment threads...

it vexes me...

Do NOT follow this link or you will be banned from the site!