Saturday, 19 of August of 2017

Economics. Explained.  

Initial Unemployment Claims

August 17, 2017

Initial unemployment claims declined 12 thousand in the week ending August 12 to 232 thousand.  Because these weekly data can be volatile the focus should be on the 4-week moving average of claims (shown above), which is a less volatile measure.  It was unchanged at 241 thousand.  The late February average of 234 thousand was the lowest level for this series since April 14, 1973 — 44 years ago!  It is holding very close to that 44 year low.

Ordinarily, with initial unemployment claims (the red line on the chart below, using the inverted scale on the right) at 241 thousand  we would expect monthly  payroll employment gains to exceed 300 thousand.  However, employers today are having difficulty finding qualified workers.  As a result, job gains are significantly smaller than this long-term relationship suggests and are currently about 170 thousand.

With the economy essentially at full employment, employers will have steadily increasing difficulty getting the number of workers that they need.  As a result, they will be forced to offer some of their part time workers full time positions.  This series is still a bit high relative to where it was going into the recession.

They will also have to think about hiring  some of our youth (ages 16-24 years) .  But the youth unemployment rate today is the lowest it has been in 17 years so there are not many younger workers available for hire.

Finally, employers may also consider some workers who have been unemployed for an extended period of time.  But these workers do not seem to have the skills necessary for today’s work place.  Employers may have to offer some on-the-job training programs for  those whose skills may have gotten a bit rusty.  But even if they do, the reality is that the number of discouraged workers today is quite low — toughly in line with where it was going into the recession.

The number of people receiving unemployment benefits fell 3 thousand in the week ending August 5 to 1,953 thousand.  The four week moving average declined 6 thousand to 1,960 thousand. In mid-May the 4-week average came in 1,916 which was the lowest level for this 4-week average since January 12, 1974 when it was 1,881.   The only way the unemployment rate can decline is if actual GDP growth exceeds potential.  Right now the economy is climbing by about 2.0%; potential growth is  projected to be about 1.8%.  Thus, going forward  the unemployment rate will continue to decline quite slowly.

Stephen Slifer

NumberNomics

Charleston, SC


Leave a comment