Unemployment Claims -- Distortions and More Distortions In the Media

 The weekly report of new and continuing unemployment claims came out a few minutes ago.  There were 881,000 new claims last week compared to 1,006,000 the week before.  There were 13,254,000 continuing claims in this new report versus 14.5 million reported last week.  These are good numbers.

So how does the media report this?  Yahoo News said that the figures this week were "historically high" but comparisons to prior weeks were "useless".  So first they compare the results to the past unfavorably but then tell us that comparisons to the past are a waste of time.  What's going on there?

The Bureau of Labor Statistics changed the way that they calculate the seasonal adjustments to these figures.  Seasonal adjustments are used to even out the numbers in view of normal seasonal patterns.  For example, if there are a great many people who normally go on unemployment when their jobs at summer resorts end in September, there would be a big bulge in unemployment claims at that time of year.  The seasonal adjustments would take that expected surge into account and make an adjustment to level it out.  Because of the pandemic, the seasonal adjustments have been distorted, so the Bureau decided to make a change to how they get calculated so as to better reflect reality.  As an example, those people working at summer resorts that we just discussed probably didn't have as many jobs this year as the bulk of such resorts were not fully open.  That means fewer extra unemployment claims in September.

It is worth noting, however, that the seasonal adjustment component of this week's report was about 50,000 claims.  The actual number of new unemployment claims was only about 833,000, so the seasonal adjustment increased the reported total.  

The real takeaway from this report, however, is that the continuing claims are continuing to decline substantially each week.  This is a rough measure of people going back to work.  There have always been too many other variables that impact unemployment levels to use new or continuing claims as an absolute measure of actual unemployment levels.  For example, some people decide not to look for work anymore, so they are no longer considered unemployed.  Students get out of school and start looking for work; they become new members of the unemployed until they find jobs.  Neither are reflected in the claims for unemployment compensation.

The big decline in continuing claims that we see in this report, however, is a pretty good indicator that the labor market and the economy is moving in a very good direction towards greater employment levels.  Somehow, though, the media can't report that.