Unemployment Claims Limbo - How Low Can They Go?

Last week the weekly unemployment claims report was released on Thursday. I was busy writing the "Top Ten Columns of September" column and researching the "September Jobs Report Forecast Column." The data that is released is the Seasonally Adjusted (SA) First-time Unemployment (FTU) Claims number and the Continuing Claims (CC) number. The data that is recorded is the Non-Seasonally Adjusted (NSA) FTU and CC values. The seasonal factors change from week to week, month to month, season to season, and year to year. When seasonally adjusted data is compared with data from different seasons with different seasonal factors False Assertions Considered to be True (FACTs) are created. The superstar of all FACTs is that we have had 82 Consecutive Weeks where SA FTU claims have been reported under 300,000 workers. There was a four part series of articles written in this columns showing that the streak didn't start during March of 2015.  It started during January of this year. 

This column has raised concerns regarding the artificially low unemployment rate, including the "Four Presidents" series which compares the employment and unemployment levels of Presidents Reagan, Clinton, Bush 43, and Obama at the same point in their presidencies. "Four Presidents at 91 months" reported an effective unemployment rate between 10.27% and 13.15%. We also  have an elevated level of people working multiple jobs. When a multiple Job Worker loses one job, even if it is a full-time job, they are not qualified for unemployment benefits because they are still employed.  

What happened last week?

First Time Unemployment claims dropped by 8,000 claims so they reported an increase of 3,000 Claims. We are seeing NSA FTU claims lower than any time since 2000. Is it because the economy is so good? No. Workforce participation was lower during August 2016 than it was during August 2008, August 2000, or August 1988.If the unemployed were finding work the participation rate would remain steady or improve as people moved from one category to another.NSA FTU claims were lower than they were last year - We had fewer than 200,000 NSA claims.

Continuing Claims recorded a drop to 1.754 Million - a Drop of 81,000 claims, so they reported a drop of 46,000 claims.The trend for the next few weeks is downward for Continuing Claims. Could we hit 1.5 million claims? Are people finding work or do they not qualify for benefits?  We saw over 1 million part-time jobs lost  and almost 400,000 full-time jobs created during August.  What happened to the people who worked those other 600,000 jobs? Did they go back to school? Did their kids go back to school?

This report is one of the most important reports during a month. The weekly unemployment report gives us the most recent data on part of the employment picture. The employment data is another important part of the economy. That picture will come into finer focus this Friday. Existing Home Sales were weak last month. New Home Sales were weak, too. New Home Construction was weak. Consumer Spending was slowing in four sectors. Inflation was rising.  If people are buying fewer homes and fewer things at stores fewer employees are needed. Fewer employees should mean more unemployed workers.

Friday's Jobs Report should reveal over 1 million lost full-time jobs. It should also reveal a drop in the seasonally adjusted and non-seasonally adjusted unemployment numbers.

If this is a game of Unemployment Limbo how low will we go before we knock down the bar and have to start all over again? We may have a better understanding of the economy this Thursday. We will have a better understanding of the employment picture this Friday.