Jack Dunn - Reclaiming Common Sense

JOLTing Unemployment Numbers


We received the monthly JOLTS (Job Openings and Labor Turnover Survey) data for April on June 5th. The JOLTS report always trails the Employment Situation Report by over a month. It was reported that we had a record level of job openings. This column has written numerous articles regarding the JOLTS data during the past few years. The data that is reported is the seasonally adjusted data, it tells us what region have job openings, hires, quits, and separations, and it fails to tell us whether those jobs are full-time or part-time jobs. It does tell us which sectors have elevated levels of openings, hires, quits and separations.  The April unemployment level was lower than the Job Openings number. This created a stir because there were, according to the JOLTS report and the Employment Situation Report, more job openings (seasonally adjusted) than unemployed workers (seasonally Adjusted.) The problem is that these experts are underestimating the impact of the seriously low participation. We have "missing participants" who are effectively unemployed. The combined "missing participants" and unemployed workers exceeded 7 million potential workers during the month of April, and could be well over 10 million potential workers if we used the workforce participation rate from the second April of President Clinton's first term in office.


Now that that issue has been addressed, what is going on with the weekly unemployment claims data? The weekly claims data is being actively ignored. The non-seasonally adjusted first-time claims data is hovering around 200,000 claims. We normally do not see the non-seasonally adjusted data at this level, at all, and if we do it has been during August or September. The same can be said regarding the continuing claims data. The continuing claims data is being "starved" by low first-time claims. How low can the first-time claims data? Can we drop below 175,000 claims a week, non-seasonally adjusted (NSA) First-time Unemployed (FTU) claims by September? Could the NSA Continuing Claims (CC) level drop by 1.25 million claims by the end of September or the first week of October? What happened this week?


The non-seasonally adjusted first-time unemployment claims dropped below 200,000 claims, again. That is correct. We have had fewer than 200,000 NSA FTU Claims seven times during 2018. We were under 200,000 claims four times last year, all during August and September.  The "pitchfork chart indicates that there may be a new low this Fall. The middle line shows a "spike" during mid-February. We did not have that pronounced of a spike this February. The next threshold is the 175,000 NSA FTU threshold. Could it drop to 160,000?


If Former President Obama was President we might has had a SA FTU reported under 200,000.  If we used the seasonal factors that were used for the first week of Jone of 2014, 2015, or 2016 then the reported value would have been lower than was reported today. We could have had a value of under 195.000 SA FTU claims reported.


As the first-time claims dwindle so do the continuing claims. Last week's continuing claims value was recorded at 1,579,407. Last week's value for the third week of May was revised to 1,574,003. This week the NSA CC was recorded at 1,568,788 claims. We are not quite at the low of last year (1.566 million.) we are lower than any other low points since and including April 14, 1973. The most recent low that was even lower than that was the first week of October  1973 when we were at 1,252,000 claims.


The Continuing Claims Value should have been reported lower than it was reported. The continuing claims value was lower during the final week of May 1967, 1968, 1969 and 1973. We could have seen a value closer to 1.72 million claims reported this week.


There is a number that receives less attention than the continuing claims number or the first-time claims number. The number that is being totally ignored is the insured unemployment rate (IUR.) We have a 1.1% NSA IUR and a 1.2% SA IUR This is the component of the 3.8% The NSA U-3 unemployment rate is 3.6%. The SA U-3 rate is 3.8%. This means that 2.5% of the population is unemployed without receiving unemployment benefits. People do not receive benefits when they work seasonal jobs or part-time jobs. Could we see a NSA U-3 rate of 2.5% and and IUR of zero?It is doubtful. Could the IUR drop below 1.0% during the week ending 6/9/2018 or 6/16/2018? Possibly. The drop registered during these two weeks will give some insight into the possible U-3 direction. Could we see the lower pitchfork tine broken on both the FTU pitchfork and the Continuing Claims pitchfork? Yes. Will it be reported? Here, yes. Elsewhere, doubtful. Will there be any noise made when the NSA CC value falls below 1.542 Million? Yes, here, no elsewhere. Same for the NSA FTU value falling below 175,000 or even below 150,000. Someone is probably scurrying to revise all the seasonal factors to keep that from happening. The seasonal factors are published through December 29. Watch the revisions to those seasonal factors. It is not a matter of if it will happen, it is a matter of when it will happen.


It's the economy.