Wednesday, 15 of August of 2018

Economics. Explained.  

Initial Unemployment Claims

August 9, 2018

Initial unemployment claims fell 6 thousand in the week ending August 4 to 213 thousand after  having risen 2 thousand in the previous week.  The 4-week moving average declined 1 thousand to 214 thousand.  The average of 214 thousand on May 12  (actually 213,500) was the lowest level for this average since December 13, 1969 (when it was 211 thousand).

Ordinarily, with initial unemployment claims (the red line on the chart below, using the inverted scale on the right) at 214 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 190 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 might choose to offer some of their part time workers full time positions.  This series is a bit higher than it was going into the recession so they might have some success in finding necessary workers from this source.

They will also have to think about hiring  some of our youth (ages 16-24 years) .  But the April level for the youth unemployment rate today was the lowest on record (for a series that goes back to 1970) 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 — it is essentially where it was going into the recession.

The number of people receiving unemployment benefits rose 29 thousand in the week ending July 28 to 1,755 thousand.  The 4-week moving average rose 3 thousand to 1,745 thousand.  The June 16 level of 1,720 was the lowest 4-week average since December 8, 1973 when it was 1,716 thousand.  The only way the unemployment rate can decline is if actual GDP growth exceeds potential.  Right now the economy is climbing by about 2.8%; potential growth is  projected to be about 1.8%.  Thus, going forward  the unemployment rate will continue to decline slowly.

Stephen Slifer


Charleston, SC

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