Reclaiming Common Sense

If a Picture is worth 1000 words - Here are More than 4000 Words

Every week the Department of Labor produces data on the first-time unemployment (FTU) claims and continuing unemployment claims (CC) levels. What used to be headline news at the bottom of the 8 o'clock hour every Thursday is no an oddity in the news. The data that is recorded is the non-seasonally adjusted (NSA) data. The data that is reported is the seasonally adjusted (SA) data. When seasonal data from different seasons with different seasonal factors are compared FACTs (False Assertions Considered to be True) are created. We live in reality.

We Recorded the Second Lowest Unadjusted First-time Claims Level for the Second Week of August during the past fifty years.  Today's recorded NSA FTU value of 198,033 is the lowest it has been for the second week of August since August 12, 1967. If you are interested in the seasonally adjusted (SA) FTU then the current value of 232,000 should be of interest to you. It has long been held that if this number is under 300,000 SA FTU then we have a healthy economy.This number could have been reported as low as 189,000. That is seriously healthy.

We Recorded The Lowest Continuing Unemployment Claims Since the First Week of August  1970. The continuing claims data lags the first-time claims data by one week. This is important to understand. Low first-time claims means lower continuing claims data. It is also important to note that we had roughly 53 million covered insured during the early 1970s compared to this year's 139.9 million covered insured. We have almost the same number of claims for 86.9 million more covered insured.  While there is very little correlation between the number of people receiving benefits and the number of U-3 unemployed workers in the Current Population Survey, this drop in continuing claims should be reflected next month in the jobs report. Next week's data will be the continuing claims data collected closest to the CPS data collection date.

The unemployment claims data is low for a multitude of reasons. We have seen 4.5 million full-time jobs created February through July of this year, non-seasonally adjusted. We have seen a drop in multiple job workers- multiple job workers do not collect benefits if they lose a job. They may be leaving one or two part-time jobs and taking one full-time job.

We need to focus on the economy on business news networks. We need to discuss politics and local or national events on the other news networks. People need to get the unadjusted data so that they can make sense of the economy. We need to start talking about the levels we are seeing recorded  before we drop below 150,000 NSA FTU claims. We need to discuss the NSA CC data before we drop 1.5 million claims.We also need to discuss the participation rate (U-6) and the effective unemployment rate (U-7) that this column has created to compare unemployment levels with varying participation rates. Inflation is low because the effective unemployment rate is closer to 10% than it it to 5%. High unemployment normally keeps inflation low, and low unemployment tends to heat up inflation. This is the Phillips Curve. We may see inflation heat up considerably this Fall as first-time unemployment claims should bottom for this year during the final week of September. Continuing claims should hit bottom during the first week of October. Or will they?

It's the economy.