Thursday, 19 of April of 2018

Economics. Explained.  

Initial Unemployment Claims

April 19, 2018

Initial unemployment claims declined 1 thousand in the week ending April 14 to 232 thousand after falling 9 thousand in the previous week.  The 4-week moving average rose 1 thousand to 231 thousand.  The low for the cycle is 221 thousand which was set back in February.  Thus, claims remain close to that level which was the lowest average level of claims since December 27, 1969 (when it was 220 thousand).

Ordinarily, with initial unemployment claims (the red line on the chart below, using the inverted scale on the right) at 231 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 200 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 — close to where it was going into the recession.

The number of people receiving unemployment benefits declined 15 thousand in the week ending April 7 to 1,863 thousand after having risen 60 thousand in the previous week.  The four week moving average rose thousand to 1,859.  Last week this average dipped to 1,852 thousand which is the lowest average since January 5, 1974 (when it was 1,839 thousand).   The only way the unemployment rate can decline is if actual GDP growth exceeds potential.  Right now the economy is climbing by about 2.5%; 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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