Dubious Indicators: Continuing Jobless Claims

Here at "A Dash" we have a continuing commitment to finding important economic indicators.  This means throwing out misleading information and finding indicators that help investors.  We are going to examine some "broken measures."  This analysis will not be biased.  We are going to throw out some indicators that skew bearish, and some that skew bullish.

Continuing Claims — A Dubious Indicator

There is a new indicator on the economic front — continuing jobless claims.  Pundits of a bearish persuasion are rejecting the recent stabilization (even improvement?) in initial claims.  They prefer to cite the hockey stick rise in continuing claims.  Here is an example, but we do not mean to pick on any single source.  You can find the chart anywhere on the Bearish Blogging Network, but we are picking it up from a more balanced source, Bill Luby.  Please read his discussion to get the context.  We just want to show the excellent chart.


The chart is alarming to all who see it — another "worst in history" presentation.  Should we believe it?

The Problem

The key point is that this is not an apples-to-apples comparison.  Jobless benefits have been extended twice (at least for most states), so recent data are not strictly comparable with past periods.

There are some who believe that extending jobless benefits reduces the incentive to look for work.  While we do not endorse that viewpoint, there is an obvious "break" in the time series.  We cannot compare periods where jobless benefits have different time periods and expect to get meaningful results.

 BLS Data

The BLS provides a different approach, available in the table below.  Anyone who looks at the actual data will see the facts, as follows:

  • The number of people experiencing 27 or more weeks of unemployment has increased dramatically in the past year, from 1.4 million to 3.7 million.  It is a bad employment situation, as we have frequently reported.
  • The mean duration of unemployment has increased from 18.3 weeks to 21.4 weeks, a serious increase.
  • The median duration of unemployment has increased from 11.0 weeks to 12.5 weeks.

This is a very negative picture, but not as bad as the popular chart suggests.

Download Duration of unemployment

Our Take

We remain very concerned about job losses, the employment rate, the rate of marginally attached workers, and other indicators.

Having said this, the four-week average of initial claims is an important indicator in our employment models.  It has stabilized in recent weeks.  Most observers do not pay any attention to actual data about new job creation, which is running at a rate of over two million per month or so.

Briefly put, we all know the employment picture is bad.  It is important to look to indicators that are comparable across time periods.  There is new employment.  Some people are finding jobs, although the rate is still poor.

The continuing claims chart is not helpful in this regard.  It should not get much attention.

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One comment

  • Henry May 22, 2009  

    Here’s something interesting: Unemployment rates supposedly dropped in 21 states in April, including in California.
    But there’s something odd about the numbers, at least the ones for California. The unemployment rate here dropped from 11.2% to 11.0%. Yet the number of jobless people increased by 63,000.
    Does anyone know how it is possible to have more people unemployed and yet have a lower unemployment rate? To my mind, the only way this works is if either: (1) You have a large number of discouraged workers who just quit looking for work and aren’t even being counted any more in the unemployment rate; or (2) the two numbers are actually coming from different sets of data.
    I remember there was a similar bizarro situation in the 2002-2003 recovery, when the Household data and the Payroll data were showing quite different unemployment situations.