Thursday, June 04, 2009

Unemployment Data - Exhaustion Rate

I have a feeling that in the not too distant future the continuing jobless claims numbers are going to start "improving" due to a negative effect - let me explain. Unemployment benefits are limited: the standard is for up to 26 weeks of insurance benefits. There are currently Federal programs offering an extension of 13-20 additional weeks.

The markets like to focus on the jobs report, which releases two main numbers: 1) the number of first time jobless claims - this is a measure of new unemployment - how many people are filing for unemployment for the first time in the week in question. 2) the number of continuing jobless claims - this is the total number of people collecting unemployment. Well, it seems obvious to me that as we extend our fiscal problems, many people will exhaust their unemployment benefits - they will drop out of the continuing claims number NOT because they have found a job and are going back to work, but because things are so bad that they have used up their benefits and will no longer be counted in the statistics. Of course, this makes the continuing claims number smaller, and leads to chatter of "green shoots" in the job force.

The United States Department of Labor publishes statistics on the "exhaustion rate" - this is a measure of the number of people who have used up their benefits, and will no longer be receiving unemployment checks. I took it upon myself to run some numbers based on their data, and produced the chart below:

I'm not sure if "parabolic" is a strong enough word to describe the current upswing (a record!) in the exhaustion rate. Again - this is why economists who refer to what "typically happens in a recession" are spouting nonsense - this is clearly not a typical recession.

It turns out the Department of Labor allows you to easily generate charts on their own website too. Unfortunately, they make it so that you cannot grab the pictures, so I had to regenerate one more telling chart:

As you can see, the percentage of people who have been collecting unemployment benefits for a longer amount of time is also at a record.

Don't be fooled if and when continuing claims numbers begin to ebb - it's likely a numerical manifestation of exhaustion of unemployment benefits - but don't expect the media pundits to mention this part of it!



Anonymous said...

nice chart however the better data set would be the % of exhaustion of all claims to make up for population changes...another good statistic to look at is average total weeks spent on unemployment per claim. an interesting statistic off topic is % of people who end there claims close to the exhaustion date which is about a 2 dev event caused by ppl simply waiting until the last few weeks to find a job and milk the free money in the meantime...when you give away free % peoples incentives to find a job seem to decrease.. go figure

Kid Dynamite said...

i don't think you need to adjust for population changes - the exhaustion rate is already essentially a normalized number: it's # of final claims / # of first claims - seems to me like population changes wouldn't have a big effect.

the second chart i made is related to your stat on avg number of weeks spent on unemployement

Vesty said...

Hey KD, just a tip.

Apologies if I'm stating the obvious to you here....

If you want to capture the charts from the Dept. of Labor (or anywhere for that matter), use the print screen key on your keyboard. Somewhere near the F12 key, usually above insert. Hit that and it will paste a copy of your screen onto the clipboard, then paste it into mspaint or something. Voila, you have the chart in question.

Thanks for the post

Anonymous said...

You can also check the USDA's food stamps program. As the recession stretches on perhaps this will be more reliable as an indication of the increase in out of work, out of a job, and out in general.

fun fact, 1 in 9 people are on food stamps in America.

hooligan said...

Hi, I'm a new subscriber (two weeks or so). I like your work, insightful. For this one, I think your work on exhaustion rate could be extended. I doubt it will be easy, but I think you need to work out how many of those exhausting their ability to claim on a cumulative basis. That is, how many people does 45% actually represent? Is it 300,000 or 150,000 who can no longer claim. Then you need to add the same numbers together to accumulate for past years. Perhaps this can better be extracted via participation rates and the total employed. This can maybe be correlated with food stamps, new homeless and of course, the crime rate to truly guage the severity of the downturn and the societal costs of unemployment and exhausted claimants. I guess it's too broad and too hot a potato to also correlate the choice of bush and obama to spend money on the Pentagon rather than on communit projects or benefit extensions. Anyway, impressive editorial, I will continue to read it!

Padmanaban said...

That’s right. Unemployment is increasing day by day. Though there are job openings but still the case is very worse, since the companies are selective, and depending on the need, they take their time in finding the right candidate.
There should be some changes to be taken effect in the education system.