It’s been awhile since I featured this pair of charts above showing: a) the number of jobless claims vs. the size of the US labor force (top chart), and b) jobless claims as a share of the US labor force (bottom chart), both updated through August with labor force data from today’s Employment Situation report (BLS data here and here).
The top chart shows why unadjusted jobless claims are misleading: the size of the US labor force has doubled over the last 42 years, from 77.57 million in 1968 to the current level of more than 155 million Americans. The bottom chart shows jobless claims adjusted for the size of the US labor force, which have been steadily declining since 2009. Jobless claims averaged 441,800 in August, which is 0.2133% of the August labor force of 155,486,000, and the lowest level since October 2007, a few months before the recession started. Since the peak of 0.424% in March of 2009, adjusted jobless claims have fallen consistently to the current level of 0.213%.
This measure of initial jobless claims, adjusted for the increasing size of the US labor force over time, shows that jobless claims peaked during this recession above the levels of the last two recessions (1990-1991 and 2001), but were never anywhere close to the levels of the previous three recessions in the mid-1970s and early 1980s, and about the same as the 1969-1970 recession. The sharp reduction in adjusted jobless claims from the March 2009 high of 0.424% follows the same pattern of sharp reductions at the end of each of the last six recessions.
Bottom Line: Jobless claims, when adjusted to account for the size of the US labor force, have now fallen back to the pre-recession levels of the fall of 2007. Conditions in today’s labor market are actually slightly better than the unadjusted claims would suggest, especially when compared to previous economic recoveries. It’s amazing that so much attention is paid every Thursday to an important economic variable (initial jobless claims) that really has no meaning unless it’s adjusted to account for the size of the US labor force.