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Initial Jobless Claims Plunge To 42 Year Lows, Despite Surging Job Cuts
The yawning gap between job cuts (surging most since 2009) and initial jobless claims (hovering near 42 year lows) continues to grow as initial jobless claims collapse 7k this week to 255k - the lowest since 1973. Bear in mind, Goldman's explanation that jobless claims are useless in this part of the business cycle..."this does not signal a booming labor market."
Charts: Bloomberg
But as Goldman Sachs confirms... "this does not represent a booming labor market"
Although payroll employment growth has slowed in recent months, initial claims for unemployment insurance benefits remain very low. The four-week moving average of initial claims has trended lower again this year—despite meaningful layoffs in energy-producing states—and is currently at the lowest level since early 2000 (Exhibit 1). Does this mean that the current rate of nonfarm payroll growth understates the strength of the labor market?
Not necessarily. As we have noted in prior research, the structural relationship between jobless claims and employment growth changes over the business cycle. Unemployment insurance claims are an observable proxy for one type of labor market flow: the number of persons laid-off each month. However, employment growth is a function of other flows as well—specifically, the number of persons hired, the number who quit voluntarily, and those who separate from employment for other reasons. These other types of labor market flows—other components of Fed Chair Yellen’s labor market “dashboard”—can affect the relationship between layoffs and employment growth over time.
Moreover, initial jobless claims are an imperfect measure of layoffs because the propensity to file a claim—often called the “filing rate” or the “take up rate”—also changes over time. During the financial crisis, for example, the benefit take up rate increased significantly. Exhibit 2 shows the level of jobless claims alongside the measure of total layoffs from the Job Openings and Labor Turnover Survey (JOLTS) (claims here are expressed as a monthly rate by multiplying the average weekly rate by the number of weeks per months). Before 2007, approximately 70-80% of layoffs resulted in an unemployment insurance benefit filing. During the recession, claims increased more rapidly than reported layoffs, implying an increase in the claims filing rate. In the years since, claims have fallen much faster than layoffs, implying a decline in the benefit take up rate.
Because of these confounding effects, it can be helpful to think of a “breakeven rate” for jobless claims—or the level of claims consistent with zero employment growth. We can arrive at this figure by using the identity that relates gross labor market flows to changes in employment:
Change in Employment = Hires – Quits – Layoffs – Other Separations
If we then express layoffs as jobless claims multiplied by the inverse of the take up rate, we can write the breakeven level of claims as:
Breakeven Claims = (Hires – Quits – Other Separations)*[Take Up Rate]
This definition says that the breakeven level of jobless claims rises with the benefit take up rate and with the number of new hires, and declines with increases in quitting and other separations.
Exhibit 3 shows our calculated breakeven rate for jobless claims, which we derived using data from the monthly JOLTS reports through July (we smoothed the breakeven rate for the purposes of this graph). Over the last few years, the breakeven level of jobless claims has steadily declined, reflecting an increase in job market separations (including quits) and a lower benefit take up rate. These trends were partly offset by an increase in gross hires. While it’s encouraging that unemployment insurance claims remain very low, they are not a sufficient indicator of labor market conditions. And at the moment, the raw level likely overstates the underlying pace of job growth. The gap between claims and their estimated breakeven rate—likely a better indicator of job market health than claims alone—points to payroll growth of about 160-200k per month, or only slightly above the run rate over the last two months.
We think this is a more realistic signal to take from the current level of jobless claims.
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Yay!
That chart reminds me of the divergence in Spanish GDP growth (ca 3%) and increase in sales tax revenue (ca. 12%) in 2006. We all know how that ended up.
I've never filed for unemployment, but don't you have to requalify if you've claimed it before? It seems to me, new hires would be the first fired in a downturn keeping your more experienced workers. If the new hires get re-fired, they aren't qualified for unemployment insurance again and claims would be down. A possibility for the lower claims numbers.
If someone is not eligible, they can't file. It may be as simple as that. Declining eligibility should go hand in hand with the rise of temporary and part time work. More ways life sucks.
Also occuring is the contractor surge, where you are getting paid corp to corp for at least a short period of time... Getting dumped after 12 or 18 months by law and not being able to file for UNC by virtue of having been an LLC for a time instead of an employee... contractor surge, being a case of firing your long term employees and hiring them back as contractors... no benefits including unemployment benefits...
tbone, you're spot on. Temp work is about all you can get in the tech sector lately.
HA, you're exactly right.
Employers know this, and game the system by getting rid of people before they hit the threshold per the state they operate in. Here in NY I think it's 6 months, or if someone is let go earlier then that, then the previous employer pays for the unemployment on that worker, so long as they weren't fired from their previous job. Or something along those lines.
Theoretically, there must be millions of people who have been stuck in the 'get hired, get laid off/fired in a short period of time', matrix since the downturn. Many of them are not counted in the claims numbers, assuming a lot of them haven't dropped out of the workforce.
So what is the difference between 'getting fired' and 'getting laid off'? Both sound like a non-wanted separation of employment. Why wouldn't an employer fire everyone so no one gets unemployment bennies?
I think you may be on to something. I've never applied either, but I have a buddy that lost his "new" job three months after being hired and he told me he did not qualify for unemployment, but I forgot why - I think he did not have the hours worked or something. Worth looking into for sure - nice point.
I'm happy.....yet sad.....all at the same time.
Instead of the phrase "Take Up Rate, you should substitute the word "Taken," as used in a confidence game. The unemployment rate number used by the Feds is now totally unreliable. Just as is almost all the background information on Obama before the age of 20. Both are works of fiction, lies.
Why not say Unemployment is 0% ? i mean Whatever the Fuck the Lie the sheeple will Believe it Right?
IT'S a RECOVERY!!!!!! (seven years and counting..+)
AND 46 MILLION ON FOOD STAMPS. Everything is fixed. Thank you FED.
But! But! Recovery!
DavidC
Obviously, this newz calls for a major gold dump!!
Quick!!
/My time. It is coming.
This is nothing more than a hoax and the world is keen to the African accounting now used in the USA.
Have they employed Gideon Gono without telling us?!
DavidC
African accounting now used in the USA.
AAAP?
Fucking tribe at it again with metals.
This should boost futures and surge the market today!
The FBI guys promised me a deal. So I made up a lot of stuff about the eCONoME. Because then, that's what they wanted. But it was all lies. Everything. They said Goldman Sachs did this, Goldman Sachs did that. So I said, "Yeah, sure." [/frank pentangeli, godfather, part 2]
So, you had buffers?
Yeah....senator....buffers (smiles)...I'm a buffer!
Yeah, a buffer, the Family had a lot of buffers. :smiles: [/cicci]
+30k difference between SA and NSA. Lets see where the NSA trend goes, it may take several weeks for the SA to catch up if there is indeed a big uptick.
Ministry of Tooth
Why bother reporting or explaining the UE rate - let obama tout the Lie and we all can watch his lips moving.
The Lyin Liar who Lies for Living and his Lyin Metric Machine goes on !
If peeples keep getting fired the unemployment rate will drop to 2% soon?!
This is the beauty of a system based on delusion.
You can have a mix of data where the predominant trend is extremely negative, but you only need ONE data point positive for the knowingly deluded to grasp upon to sustain their perspectives.
As Lloyd would highlight...."so what you're saying is there IS a chance".
The Dumb and Dumber economy.
So, long story short...is this "liftoff"?
They don't accept claims anymore....that solved the problem
You can bet their thinking about it.
Get rid of uneployment insurance so therefore your not counted as being unemployed.
The survival rate of every employee drops to zero when no one wants to work.
So an interested correlation that Im waiting to see (if its not happening already):
1) Manufacturing jobs were converted to waiters/bartenders/service industry.
2) Consumer Census shows consumers are going out less and starting to save more (or just struggle to pay bills)
3) Restaurants should start losing business (if not already) and will probably have to lay off some of those (post-manufacturing) waiters and bartenders.
So in theory we havent really felt the impact of all the manufacturing layoffs yet. The conversion from manufacturing to service industry was a "soft landing" of sorts. When they lose their job at the restaurant/bar there should be a big impact on employment numbers (if they arent fudged as much as some think).
BLS's reshuffling of the numbers always makes them look good now. Just lie and readjust them until people drop off their 26 weeks of unemployment.
After running out of unemployment insturance theses people are discouraged, not unemployed.
It's gotten to the point where anyone with half a brain knows the BLS lies, but it's way over the top when they just shove it in your face and say, "Yeah, we're lying. Fuck you." The saddest part is that probably 75% of the population doesn't even have the half a brain necessary to realize it's a lie.
75%? I'll be damned, another optimist on ZH! lol
Yeah, you're probably right. It would just depress me to write anything higher.
I think that half of them are lying and the other half are too damn stupid to realize they are lying.
Then there's the 1% of us that realize that you should not count a part time job as a full time job; Nor will you show up unemployed if you have three part time jobs and lose two of them.
Were we 25%, we could have made a difference by now.
How can you put in a claim if you can't even get a job in the first place?
So therefore your not unemployed.
If people protested this in force politicians would change it.
Since nobody complains they push this fraud even further.
And this is why the "initial jobless claims" is a misleading indicator. Labor force participation rate is the only useful indicator, until they figure out how to lie about that.
So, challenger job cuts, which are only announced cuts, which only involve large companies who announce such things - is a more reliable indicator than state reports of how many people, in all sorts of jobs at all types of companies, are collecting benefits.
ZH - Data driven.
Oh, and for all you genuises who say that there are fewer people elibible for benefits, here is the covered employment chart (Hint - it's at an all time high):
https://research.stlouisfed.org/fred2/series/COVEMP/
Thanks for that. For everybody else, "Covered employment is when an employee performs a service for a person or organization in return for compensation in the form of covered wages. Wages paid to employees in covered employment are used as a basis in establishing an unemployment insurance benefit account, if an employee becomes unemployed by no fault of their own."
If you compress the dates on that chart, it reveals that covered employment was rising or stable until March 28, 2009- by which time the stock market had started to recover- the stock market trough was approximately February 1, 2009. So it looks like covered employment is a lagging indicator? Why? Not sure. One factor could be that if you fire a covered employee, you are still assessed unemployment payments for that employee so you are basically paying for the person even if they are not working for you. So employers fire them last.
But, but, Obama says we're in a recovery!