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Interpreting The Head Scratching Unemployment Claims Data
Interpreting The Head Scratching Unemployment Claims Data
Courtesy of Lee Adler of the Wall Street Examiner
Actual, not seasonally adjusted, initial unemployment claims totaled 319,349 last week, according to the Department of Labor tabulation of weekly data submitted to it by the 50 state employment departments. This number was virtually unchanged from the prior week total of 319,382. As always, the media reported only the seasonally manipulated numbers showing a decline of 5,000 claims to 359,000. And that left them scratching their heads because of a major revision of 5 years worth of seasonally adjusted crap data. Here's how the DOL put it:
This week's release reflects the annual revision to the weekly unemployment claims seasonal adjustment factors. The seasonal adjustment factors used for the UI Weekly Claims data from 2007 forward, along with the resulting seasonally adjusted values for initial claims and continuing claims, have been revised.
The good news is that the actual data is the actual data. It doesn't change because of some ever changing seasonal hocus pocus factor that results in 5 years worth of data revisions that still do not accurately reflect reality. I analyze only the actual data, which is the data that everyone should be focused on. The government reports it. The mainstream media and the economic punditry ignore it. It's no wonder that their guesstimates have all the accuracy of a coin flip.
Because there are seasonal fluctuations that do vary widely based on underlying economic conditions, in order to determine whether this week's number is good, bad or indifferent, we need to compare like to like. That's easy. Just compare this week's number to the same week in prior years, comparing both the total, and the weekly change. Total claims during the week ended March 26, 2011 were up by 3,000 to 357,457. Total initial claims this year in the week ended March 24 were down 10.7% from that level. The flat week to week change was this year, represents a not material improvement versus the 2011 data.
In the week ended March 27, 2010, initial claims fell by 449 to 408,204. This week's report was not materially different than that change, and it represents a 21.8% decline from that total. Looking at the big picture, the trend rate of decline in first time claims has consistently been around 10% for the past 18 months. There's no sign of any change in that rate, suggesting that the economy remains in a slow growth path, shedding far fewer jobs than during the 2008-2009 collapse.
Continuing claims are on a similar downward plane, declining for the past 3 months at approximately a 10% rate.
The problem here is that we have no way to know how much of that is due to people getting jobs and how much is due to people exhausting their benefits and falling through the social safety net. Many of these unfortunates resort to what I call "synthetic unemployment compensation," aka government guaranteed student loans.
This chart represents the growth of Federal student loans outstanding. After hovering around $10 billion in 2007, the amounts outstanding grew to around $175 billion at the end of 2010, tracking the growth of continuing unemployment claims. But as continuing claims began to decline in 2010, these loan programs continued to grow, with another big spike in 2010 when the Federal government temporarily allowed extended unemployment benefits to expire.
Finally late in 2011 and early this year, with continuing claims and extended and emergency Federal unemployment claims in declining trends, Federal student borrowing programs again surged. This is a sign of the hidden unemployment problem among young adults, who turn back to school out of desperate need for funds of any kind. Unfortunately, many of these loans will only be partly repaid in 40 years when the government garnishes the borrowers' social security benefits. For now, for many this funding represents a last desperate means of sustenance.
None of the data tells us how many jobs the economy is adding, but the real time withholding tax data, adjusted for inflation tells us, "Not many," in fact, none.
The 4 week moving average of the annual percentage change in withholding tax collections is virtually zero, suggesting that the economy hasn't added any jobs since this time last year. It's probably a good bet that the March payrolls data to be released a week from Friday will disappoint.
The claims data suggests that the labor market has been a model of consistency. While that may raise suspicion in the "vast government conspiracy" wing of economic chatterers, if the government is fudging, it has been doing so for a long time with multiple data streams. That would involve manipulation across a multitude of government agencies involving scads of data managers, analysts, and other employees. It's likely that somebody would have squealed if the data was being falsified on a large scale over time.
While the media wallows and flails in the clearly unreliable seasonally adjusted nonsense, I think the actual data tells a reasonably clear story that seems consistent with a wide range of data that I track, as well as simple empirical observation of the real world. Things are marginally improved today. We can debate whether the forces driving that improvement are sustainable (they're not), and we also know that a growing parallel universe is developing with increasing numbers of people who have fallen through the cracks. But the relative improvement, however slight, is real, and that's all that matters to buyers of equities. As long as these trends hold their own, the stock market should do so as well.
That does not change the fact that while fewer people are claiming unemployment benefits, many more have fallen off the rolls, and far fewer people have full time jobs today than 4 years ago. That does not look likely to change any time soon based on the current data.
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Trust is a fool's errand with regard to what govt publishes or says. I just drove a section of road leading to the freeway (1.5 miles) and there was someone begging on every corner and this is in a large city in a state that is "doing well" in relative terms. I don't need published, said, or other academic economic indicators to clearly see the utter disaster around us.
In the context of what you say is a 'marginal improvenment'
You failed to mention or address the mean LT UE duration, which has been hovering at the 40-41 week mark for about 6 months.
Though it appears to be trending down very slightly (0.7 weeks) I suspect that is more a consequence of the millions no longer counted or qualified for continuing claims, having exhausted their euc benefits.
You also neglect Continuing Claims. So, I think your analysis of (all) the data, both direct and indirect does not fully support your cliam of improvement. Perhaps marginally, but I think it is a short-term ruse.
I also believe that the government has been engaged in data manipulation for a long time. And, yes that is my opinion, just as your claim of the government not 'fudging' numbers is your opinion.
You are wrong about seasonal adjustment.
There things that are 'seasonal' but defy the calendar. For example, Easter is on the lunar calendar not the Gregorian calendar. If you were to compare the 'same' calendar week to the calendar week in the prior year previous to Easter at Easter and post Easter you will get distorted garbage.
Moreover, many of the people (like yourself) who rant about seasonally adjusted data claim that the weather is distorting the data today. Your approach does NOTHING to alter that. Having a warmer, colder drier or wetter (spring, winter, summer or fall) is a factor to contend with whether data are seasonally adjusted or not.
Also its leap year this year.
How do your account for that? What is the comparable 'week' for last year when there was no leap day? Seasonal adjustment takes account of that; you do not.
When you RESTRICT yourself to 'NSA' data you can only look at Yr/yr trends and you run the risk of missing the boat when trends turn. And... picking the proper 'analog week' for last year is not straight forward.
There are 14 different 'types of years'. They can start with any day of the week then they can be or not leap years. then we can multiply that by noting the holidays that move around... Easter alone roams over a very wide range (look it up; there is a good internet site on Easter and how it aligns with the Gregorian calendar)
Seasonal adjustment programs have their problems; we know that the methods are and can think about how the process might distort the data under certain circumstances.
You want to take us back to the stone age.
Are you a Luddite or just Amish?
No thank you.
There is nothing highbrow about your approach. Zinging seasonally adjusted methodology because it is not perfect is throwing the baby out with the bath water. many people love to be critical of what they cannot - or refuse to- understand.
Don't be one of those.
So, there’s a job posted, and three people apply for it - a mathematician, an accountant and an economist.At the interview, the mathematician is asked, “What is two plus two?” “For,” he says. “Exactly?” the interviewer says. “Yes, exactly,” he responds, a little surprised.
The accountant comes in and is asked the same question. “Four, on average,” he says. “Give or take ten percent.”
And then the economist is called in and is asked the same question: “What is two plus two?”
The economist looks around, gets up, locks the door, goes over to the window and pulls the shades, checks to make sure that there is nobody else in the room, and then comes back over and sits next to the interviewer:
“What do you want it to equal?” he asks.
But housing has bottomed? Make up your mind.
Thing about these numbers is, they're not just numbers, these are people. Why the hell 4 years into this fiasco are 1/3 of a million or more Americans getting booted from work? Does no one in DC stop to consider that all of our money being spent on this or that bailout is having absolutely zero effect? And if they're not considering this, why the hell aren't all of in the streets to "convince" them of this fact?
We're very close to the point where Americans lose patience, IMHO.
Close to a point?
No way, no how, not even. Don't you know that DWTS is in a new season? Haven't checked the Amazing Race? How's about the Sweet Sixteen? NBA playoffs are on the way. Not too long before the NFL preseason is upon us. WHo will do better; Payton or Tebow???
These are the things people in this country gives a rat's ass about. AND NOTHING ELSE!!!! If you think for a minute that the fat, lazy, ignorant worthless slobs that are "America" will expend any energy to understand or care about what is happening, you are beyond sadly mistaken.
Look for "Gas Stamps" soon. That too will be a "SNAP".
Those tv shows are the circus and the snap card is the bread. Circus and bread held the romans together for a while but the end came just the same. We are on the same road.
Circus and bread, bread and circus, keep repeating.
gas stamps? obama crushed all the affordable used clunkers. people gotta buy 45,000 prius and volts.
People feel powerless. And isolated in the suburbs.
Next they have to start rigging the all time record food stamp recipients of nearly 50 million people. With the cooking the books talents, it should be a SNAP!
yep, Govt is so 'experienced' at cooking the numbers you wonder if they know any other technique
The best tax data to analyze here would probably be social security. Analysing tax collection, is what Trimlabs uses, as far as I remember. And their numbers have been consistently below the consensus lately...
Let's see how both sets of data can be true. If one job disappears with annual compensation of $100,000 and two appear with compensation of $30,000, what happens to withholding tax? It goes down. And unemployment goes down too! Does it mean economy improves "slowly"? I do not think so...
With the fewest people working as a percenatge of the population in over 30 years it would make sense that the number of people claiming unemployment for the first time would be falling. In that context a number above 300k is actually very high.
You also forget to take into account the fact that the vast majority of people who have taken part time jobs are not eligble to make a claim for unemployment. If a person loses a job and never tries to make a claim, they aren't counted.
Also with 15% of the working age population holding multiple jobs, if they lose one of those jobs they will also not apply for unemployment.
What picture does that paint when tax reciepts are falling during a period of record multiple job employment?
Keep trying to find that rosy picture using manipulated government stats. That way you'll never need to look at reality and see the slaughtered corpse of America.
And something else: the BLS claims report never even considers the huge number of independent, self-employed tradesmen who have so little work they are effectively unemployed---but completely ineligible for unemployment benefits.
They show up on no unemployment rolls, collect no unemployment check, and are just hanging on by their fingernails. And I know a lot of them.
You can one more to that list Crucible!
Even though you don't know me! ; b
Absolutely I_C, now add the small corporate/partnership business owners that have to pay unemployment on their (and their families) wages but are NOT allowed to collect it. I personally continued paying employees for over three years without drawing a paycheck of my own. Now I make less than minimum wage in wages, and pay my full boat 11.58% state unemployment tax for a benefit I will never be able to draw even if Bank of A. closes my business in August (building refi due, every five years they take more of my retirement while threatening to bankrupt me for paying on time every month).
There are MANY uncounted, and unpaid, businessmen that are being slaughtered while the Rosy-Optimists Club on tv work to get the Great & Powerful O re-elected.
We are being gutted within and cancer usually doesn't show up on its own.
Well, doesn't show until the patient is nearly dead.
Drive around. Those blackened businesses are lost jobs & futures, no matter what the stats are saying to us.
The patient is nearly dead now. As long as SNAP, section 8, free credit for tvs and cars and homeland security continue to fly, nobody is going to care. Yet.
There's the (air quote)actual data(air quote)... And then there's Shadowstats.
How can I tell when my government is lying to me?
BANTGTY - Believe absolutely nothing the government tells you.
Back in the USSR, we reached a stage where everyone understood this. Here, we not quite far enough down the road to socialism, but we are getting there quickly.
If the adjustments are complicated enough, 99 percent of the American Public won't bother to try to understand them anyway, or won't understand even if they try...
That would be fascism sir, not socialism. If it were socialism everyone would have a job, free healthcare and 4 weeks vacation per year. Under fascism, companies are encouraged to take big risks and if successful they get to keep the profits. If they risk and lose, we the taxpayer picks up the tab, thus diverting wealth from the middle class to the 1%ers.
lee, since we hit a housing bottom, perhaps you can explain why a fed economist feels another 5 trillion of mortgage debt needs to be wiped out to get back to historical LTV....before housing can begin an upward trend.....
If we have hit a bottom (doubt it), we could stay there for the next 10+ years until it becomes the new accepted norm where owning a house was something that previous generations did!
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