The peak in initial claims might be in but the peak in unemployment has not. Moreover, reported continuing claims hit 6.883 million, setting a new all time record. By the way, the real number of continuing claims is closer to 9.4 million as detailed below.
Please consider the Department of Labor Weekly Claims Report.
Seasonally Adjusted Data
In the week ending July 4, the advance figure for seasonally adjusted initial claims was 565,000, a decrease of 52,000 from the previous week’s revised figure of 617,000. The 4-week moving average was 606,000, a decrease of 10,000 from the previous week’s revised average of 616,000.
The advance seasonally adjusted insured unemployment rate was 5.1 percent for the week ending June 27, an increase of 0.1 percentage point from the prior week’s unrevised rate of 5.0 percent.
The advance number for seasonally adjusted insured unemployment during the week ending June 27 was 6,883,000, an increase of 159,000 from the preceding week’s revised level of 6,724,000. The 4-week moving average was 6,769,000, an increase of 12,000 from the preceding week’s revised average of 6,757,000.
click on chart for sharper image
Initial Jobless Claims Skewed By Autos
Notice the enormous difference between the seasonally adjusted numbers and the unadjusted numbers.
To help explain the the difference, please consider Jobless claims drop steeply, skewed by autos.
The number of U.S. workers filing new claims for jobless benefits fell sharply last week but the data was distorted by an unusual pattern of layoffs in the automotive industry, which amplified the decline.
The Labor Department said on Thursday that initial claims for state unemployment insurance fell 52,000, the largest drop since December, to a much lower-than-expected seasonally adjusted 565,000 in the week ended July 4, from 617,000 the prior week.
A Labor Department official said that there had been far fewer automotive and other manufacturing layoffs last week than anticipated on the basis of past experience of claims over July, when many plants are commonly idled.
“I would expect the underlying trend (in claims) is probably diminishing but it’s hard to tell from this number how much is noise,” said Keith Hembre, chief economist at First American Funds in Minneapolis.
Regardless of how one views the dip in claims, improvement in the 4-week moving average of initial claims is on a snail’s pace. The number peaked in march around 650,000 and is still above 600,000 four months later!
Those expecting a recovery in jobs soon are going to be disappointed.
Economists expect to see unemployment by 10% at the end of the year. In January I called for 9.8%+- by August and approaching 11% by the end of the year. The unemployment rate is 9.5% as of June. Bear in mind the “stress-free tests” conducted by the Fed had an adverse scenario of 10.3% at the end of 2010.
By the way, when people use up their benefits they drop off the roles. Most states have extended benefits and the Federal Government has also extended benefits. Those on extended benefits are not counted in the continuing claims numbers.
Inquiring minds may wish to consider the Emergency Unemployment Compensation (EUC) PDF.
EUC is a federal emergency extension that can provide up to 33 additional weeks of unemployment benefits. The first payable week was the week of July 6-12, 2008. You must run out of your regular benefits by December 19, 2009 to qualify for EUC benefits.
The EUC program has been extended. The legislation to extend EUC does not include any additional weeks of benefits. The legislation only extends the last week you must run out of regular benefits to apply for EUC and the last payable week of EUC.
The original extension passed in July 2008 paid up to 13 weeks of additional benefits. Effective November 23, 2008, we can pay up to 7 additional weeks of benefits.
Effective December 7, 2008, we can pay up to another 13 weeks of benefits. We began making payments on these additional weeks on January 16, 2009. We will send you a Statement of Wages and Hours if you qualify for these additional weeks. You do not need to apply or contact us to receive these additional weeks.
Adding 2.519 million to 6.883 million we arrive at 9.4 million receiving unemployment benefits.
In addition to those on extended benefits not being counted in the reported continuing claims numbers, every week some people have used up even their extended benefits. They simply drop off the roles. For these reasons, the reported continuing claims number is much worse than it looks, yet it still keeps setting new records.
Mike “Mish” Shedlock
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