Weekly Unemployment: Lying with Numbers 11 comments
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This week, yet again, the Wall Street spinsters were making hay while the sun shines.
The Marketwatch headline reads “Initial jobless claims lowest since January.”[i] Bloomberg reported that “U.S. Initial Jobless Claims Decreased Last Week”.[ii] CNBC ran the headline “New Jobless Claims Plunge; Continuing Claims Hit Record”[iii].
Other cheerleading sections ran similar headlines. The media seems to be going out of its way in an attempt to reinforce the perception that things are getting better, the economy is “healing”, and green shoots are popping out all over the place. Never mind whether or not it is true. Truth doesn't count for much these days.
The new weekly unemployment report, issued by the United States Bureau of Labor Statistics (BLS) on Thursday, did show that in
the week ending July 4, the advance figure for seasonally adjusted initial claims was 565,000, a decrease of 52,000 from the previous week's revised figure of 617,000. [iv]
However, Wall Street's cheerleaders immediately leapt on this as more “proof” of the green shoots theory. The truth is found with a deeper look. If we look at the numbers without “seasonal adjustment” (NSA), we find that unemployment claims DID NOT fall, but, actually, rose by 17,612 from the prior week.
But, let's forget about the gimmicks in government statistics, for a moment, and assume that seasonal adjustment is needed. The critical fact is that that the number of non-adjusted new claims for unemployment insurance benefits rose by 175,834 claims year over year. In other words, back in the week of July 4, 2008, new claims were only 401,672. With the government's adjustment for the season, the increase
in new claims year over year is actually 198,000. So, seasonally adjusted or non-seasonally adjusted, we have a catastrophic rise in the number of new claims for unemployment on our hands.
But, let’s look even deeper. Unfortunately, it is not particularly unusual for the number of new unemployment insurance claims to temporarily decrease in early July over late June. For example, in the week ending July 5, 2008, a year earlier, the advance figure for seasonally adjusted initial claims was 346,000, a decrease of 58,000.[v]
Perhaps, people wait out Independence Day week before making their unemployment claim, or, perhaps, employers wait until afterwards to announce layoffs. Even in the week ending July 1, 2006, before the advent of the acute stage of the financial crisis, and in the midst of the housing boom, the advance figure for seasonally adjusted initial claims was 313,000, a decrease of 2,000 from the previous week's revised figure of 315,000.
Thursday’s unemployment numbers are NOT good news, except to those in the media who want to paint a misleading picture of things, and those investors who are grasping at straws. The BLS numbers simply provide additional evidence, all of which points to a continuing steep decline of the American economy, with more brown weeds poking their ugly heads out of the ground, and no green shoots at all.
Disclosure: No positions in any company named in the article.
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This article has 11 comments:
But what does that really tell us about the current direction of the economy? If you look back to October/November 2001 and compare those numbers with the same period in 2000, they were also dramatically worse in 2001 - yet that was also the official END of the 2001 recession.
So if your interpretation is simply that things are worse now than they were a year ago, you are stating the obvious. The end of a recession is the point where the economy hits rock bottom, so much of the data at that point will be WORSE than it was during the rest of the recession, especially when you go back an entire year!
> But what does that really tell us about the current direction of
> the economy?
I think you ask the wrong question, given the name of this article being "Lying with Numbers." The point is that the government uses seasonal adjustments -- as it does with the B[L]S birth/death model -- to make employment figures look "not as bad" as the situation on the ground exists. The same can be said of the substitutions and hedonic adjustments made to the CPI during the 1990s. Simply put, the author is asking readers to CONSIDER THE SOURCE when it comes to reported statistics and ask if the source has a vested interest in the reported figure. When it comes from an agency of a particular regime, whether it be our federal government or that of the People's Republic of China, that agency has a vested interest in making the regime look good.
"The critical fact is that that the number of non-adjusted new claims for unemployment insurance benefits rose by 175,834 claims year over year."
This is THE critical fact? Really? You think that the important analysis of unemployment claims is year-to-year? Why? Isn't a year an arbitrary number? Why not two years? Why not three? Your analysis is stunning - you're able to glean from your calculations that the economy is worse now than it was a year ago. Quick - somebody call the Nobel committee!
Let's just be clear about this - when December comes, and the unemployment rate is still rising, but year-to-year first time claims are lower, you'll be saying that things are getting better?
"...we have a catastrophic rise in the number of new claims for unemployment on our hands."
"Catastrophic"? Hyperbole much?
> ...we have fallen back to 2000 levels of total employment.
Complete and total nonsense. Look at ANY data on the subject.
> Only one out of 2.4 Americans now has a job.
Hogwash. With 300M people in America, this would mean 125M employed; the latest number is 140M. Which, by the way, means that a higher percentage of the population is now employed than at almost any time between 1970 and 1983. [ftp://ftp.bls.gov/pub...
> Stocks, real estate, and many other asset classes have also given
> up the decade’s gains.
Yes, the S&P 500's return in the last 10 years is -20%. Of course, this arbitrary sample starts pretty close to the peak of the dot-com bubble, doesn't it? Consider the returns for the four years prior to that ending 6/99: 30.2%, 34.7% 26%, 26.1%.
As for real estate, no way real estate's back at 2000 levels. The Case Shiller 20-city composite was 40% higher in April than January 2000.
It is what it is. Your interpretation/analysis in this article compared it to a year-by-year numbers which is different from what the original news which was the monthly results. So we are looking at different pictures in the first place. But long-term trends are reversed gradually not dramatically.
the metrics are very limited. Just-in-time/as-needed employment turns many MANY in this work force into temp contractors and at any given time the current metric is really just a sort snap shot-window view of what many think is a much broader number. Thanks for this piece.
Except for the ones that just got laid off, are looking for work and watching their savings fall, or just got their benefits cut off.
Those folks understand the pain behind the headlines.