Filings for Unemployment Insurance Rise; Concern About Continued Claims Grows

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • 244,000 1st time claims for unemployment insurance for the week ended July 22, 10,000 MORE than the prior week;
  • Filings for week ended July 15 revised UP from233,000 to 234,000\
  • Four-week moving average of first time claims UNCHANGED from prior week at 244,000;
  • Moving average for week ended July 22 was UNCHANGED from prior week at .0159 percent of total employment;
  • 1,964,000 continued claims for unemployment insurance for week ended July 15, 13,000 FEWER than the previous week;
  • Continued claims for week ended July 8 UNCHANGED at 1,977,000
  • Four-week moving average of continued claims INCREASED 4,750 to 1,963,750.

Image result for unemployment claimsThe number of initial claims for unemployment insurance resumed its upward climb for the week ended July 22 after two weeks of decline, the Labor Department reported Thursday.

Perhaps more concerning was the 8th consecutive weekly increase in the four-week moving average of continued claims, the data series which can serve as a surrogate measure for hiring. In the last two months, that measure has increased 48,250 or 2.3 percent. So, while fewer workers are being laid off, their replacements, if any are not coming from the ranks of the unemployed. And, indeed, the likelihood of a new layoff getting a new job appears slim.

How this will play out in the Employment Situation report to be released August 4 remains to be seen but if the weekly report on unemployment claims is a guide, the unemployment rate will likely be unchanged and the number of new jobs will be disappointing. The moving average of continued claims rose 25,750 from mid-June to mid-July.  The increase was the average rose 50,000 from mid-December to mid-January. Next week’s report could shatter President Trump’s claims about job creation which has thus far averaged 173,000 since he was inaugurated. In the same five months last year, job growth averaged 191,000 per month. The period last year included the addition of 297,000 new jobs in June, the largest bump in payrolls in over a year,

One factor which has washed through the unemployment claims data is the blip in claims due to annual retooling in the auto industry which typically puts assembly line workers on furlough while plants are reconfigured for new models. While that should be picked up in the seasonal adjustment of raw data, it isn’t always. The United Auto Workers contract still allows furloughed auto workers to collect unemployment insurance during the retooling when they are not working.

In any case, the returning workers will not be “new” jobs and in fact, depending on the timeing of layoffs and recalls perhaps not even change the total number of automobile manufacturing jobs.

The claims reports came one day after the Federal Open Market Committee wrapped up its two-day meeting by reasserting its plan to reduce and said it would begin “relatively soon” so long as moderate economic growth continues. The Federal Reserve has been reinvesting the proceeds of maturing Treasury and agency (Fannie Mae and Freddie Mac) securities into new purchase of mortgage backed bonds as another form of economic stimulus.

Though many economists have expressed concerns of a pending slowdown, the Fed remains optimistic.

The Fed’s assets grew by about $4 trillion in treasury and mortgage-backed securities as part of its efforts to reduce borrowing costs for businesses and consumers. The economy has not achieved the target set by the FOMC of 2 percent inflation.

You can hear Mark Lieberman every Friday, at 6:20 am on the Morning Briefing on P.O.T.U.S. radio @sxmpotus, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

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