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Thursday, June 25, 2009

Initial Unemployment Claims Increase

by Calculated Risk on 6/25/2009 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending June 20, the advance figure for seasonally adjusted initial claims was 627,000, an increase of 15,000 from the previous week's revised figure of 612,000. The 4-week moving average was 617,250, an increase of 500 from the previous week's revised average of 616,750.
The advance number for seasonally adjusted insured unemployment during the week ending June 13 was 6,738,000, an increase of 29,000 from the preceding week's revised level of 6,709,000. The 4-week moving average was 6,759,750, a decrease of 3,250 from the preceding week's revised average of 6,763,000.
Weekly Unemployment Claims Click on graph for larger image in new window.

This graph shows weekly claims and continued claims since 1971.

Continued claims decreased to 6.74 million. This is 5.0% of covered employment.

Note: continued claims peaked at 5.4% of covered employment in 1982 and 7.0% in 1975.

The four-week average of weekly unemployment claims increased this week by 500, and is now 41,500 below the peak of 10 weeks ago. There is a reasonable chance that claims have peaked for this cycle.

However the level of initial claims (over 627 thousand) is still very high, indicating significant weakness in the job market.

There was plenty of discussion about the decline in continuing claims last week. A few comments:

  • My view is the most useful number in the weekly claims report is the number of seasonally adjusted initial claims (with a 4-week moving average because it is so noisy). This has declined from the peak of 10 weeks ago, but is still very high. This suggests that the peak of job losses might be behind us, but also that there are still significant job losses occurring. We will probably see monthly job losses reported by the BLS until the weekly initial claims numbers declines close to 400 thousand.

  • The continuing claims number can decline for several reasons: 1) some pickup in hiring, 2) standard unemployment benefits may be expiring, and 3) the estimate might be revised. The continued claims estimate for last week was revised up some - so that explains part of it. Also, as people move off the standard 26 week unemployment benefits, they are no longer included in continued claims (for the most part). These people are still receiving extended benefits, but that is tracked elsewhere.

    If we look back 26 weeks from last week, there was a huge jump in NSA initial claims (from 536 thousand to 760 thousand) or 224 thousand in one week back in December. Any of those people who are still unemployed (and many probably are) were moving off the standard unemployment benefits to extended benefits and are no longer counted in the continued claims. That probably counts for most of the decline last week. But it is also important to remember they are still receiving unemployment benefits (extended benefits).

    When looking at this report, I'd focus on the 4-week moving average of initial claims, not continued claims.