Two weeks ago I wrote about the increasing Unemployment Exhaustion Rate, which means more people are using up all of their unemployment benefits and will thus roll out of the "continuing claims" jobs numbers which are reported, making the numbers seem better than they are.
Today, although initial jobless claims filings increased slightly from last week, to 608,000, the number of continuing claims fell by 148k, to a total of 6.69 million. Now, there are two main reasons continuing claims can fall: the first is that people go back to work, and the second is that people exhaust their benefits and are no longer eligible to collect unemployment. My thesis is that the latter explanation is more realistic, and that despite the Bloomberg story touting this "plunge" in continuing claims, the number does not indicate a return to euphoria for our markets and economy. The analysis is complicated because there are all sorts of varying extensions of unemployment benefits (achem - are we extending unemployment benefits because the economy is looking so good? of course not), but let's look at some of the data from when initial jobless claims spiked:
Today, although initial jobless claims filings increased slightly from last week, to 608,000, the number of continuing claims fell by 148k, to a total of 6.69 million. Now, there are two main reasons continuing claims can fall: the first is that people go back to work, and the second is that people exhaust their benefits and are no longer eligible to collect unemployment. My thesis is that the latter explanation is more realistic, and that despite the Bloomberg story touting this "plunge" in continuing claims, the number does not indicate a return to euphoria for our markets and economy. The analysis is complicated because there are all sorts of varying extensions of unemployment benefits (achem - are we extending unemployment benefits because the economy is looking so good? of course not), but let's look at some of the data from when initial jobless claims spiked:
| Date | Initial Claims |
| 12/6/2008 | 759,531 |
| 12/13/2008 | 629,867 |
| 12/20/2008 | 719,615 |
| 12/27/2008 | 717,000 |
| 1/3/2009 | 731,958 |
| 1/10/2009 | 956,791 |
| 1/17/2009 | 763,987 |
Most states offer roughly 26 weeks of benefits, so it makes sense that the people who were filing for unemployment 6 months ago, when the initial jobless claims really spiked, would be exhausting their benefits now. Obviously, it's presumptuous to assume that each and every initial claim filer from 12/6/08 remains unemployed, but my point is that EVEN if none of them found jobs, the continuing claims number would still go down! (due to the simple math that the number of people exhausting their benefits is greater than the number of new filers). That's why I'm not jumping up and down about the slight downtick in continuing jobless claims.
-KD
full disclosure - short SPY via common and options
2 comments:
Wouldn't the 3rd be that people become self employed? The government has no means to measure those who fall off payrolls and begin to work for themselves. I think this was a issue in the early 00s. Economy was recovering but the jobs numbers weren't reflecting the prosperity.
well, i certainly don't think that the jobs numbers will UNDERestimate the strength of the economy!
i think you can see the breakdown in the unemployment rate data details.
i actually think the continuing claims numbers will get better in the coming months due to the phenomenon i described in this post
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