Adjusted for Labor Force Growth, Today's Jobless Claims Are Below Average

From Monday's "The Gartman Letter":

Amidst all of the talk of rising weekly jobless claims being so egregiously large, let us try to put what has gone on thus far in historical perspective: Jobless claims are modest, at worst, compared to past periods of protracted economic weakness. Average weekly jobless claims are hovering around 350,000. In the recession of 2001 they bottomed at or near 470,000. In the recession of 1990-91, they bottomed at or near 500,000 (see top chart above, click to enlarge).

These last two recessions pale, however, when compared to the truly difficult recessions of the 1970s and 1980s. For example, in the recession of 1981-82, initial jobless claims rose to a stunningly high 680,000, while in the short but severe recession of 1980, claims touched 620,000. In the Arab Oil Embargo "inspired" recession of 1972-74, jobless claims rose to 550,000.

We shall not argue that claims will not move higher than where they stand presently, for almost certainly they shall. But let us keep things in perspective. Back in the mid-1970s the US population was approximately 215 million; now it is 303 million, or 140% of what it was. Thus the 550,000 "claims" in the recession in the early 1970s would be the rough equivalent of 775,000 now, and we are but half of that. Today's "claims" are bad, and for those making the claims they are horrid, but in the great scheme of things they are modest... indeed, surprisingly so.

The top chart above shows initial jobless claims (4-week moving average) and the civilian labor force from 1987 to 2008. The labor force has increased by 30% since 1987, so the frequent comparisons of today's jobless claims of around 350,000 to previous periods and previous recessions is biased and flawed, as Dennis Gartman suggests.

The bottom graph above (click to enlarge) shows initial jobless claims as a percent of the labor force, to adjust for the increase over time in the population and labor force. May's 0.238% level (368,500 claims / 154,534,000 labor force) is below the 0.27% to 0.33% range of the last recession in 2001, and way below the 0.30% to 0.40% of the 1990-1991 recession.

Using the percentage from the first month of the last recession (0.26646% in March 2001), and the current labor force of 154,534,000, jobless claims today would have to be close to 412,000 before the current economy would in as much trouble as the economy in March 2001, when the last recession started. Further, the current level of 0.238% is actually below the .257% average since 1987.

Comments

[Depressedal...:]

I remember a professor in the "college days" who described statistics as the science that one can manipulate at will to get the desired results." All the statistics quoted in the above article is meaningless because THIS current recession is going by "new rules" which very difficult to discern and be accurately interpreted.

Yes, while it is true that we are NOT at this moment undergoing the classic interpretation of what a recession is ( three consecutive quarters of...) but the rules "are a changing." Common sense is conveniently overlooked. More men are victims of this recession that the past recessions. It is no longer the bear market versus the bull market but more like the actions of a "few" (banks and investment banks) snowballing into the rest of the economy. It is the intervention-meddling of the "speculators" keeping the price of crude at an artifical price, not at the "market value."

As far as statistics showing that employment is steady and that there are fewer claims for unemployment for the months of..... That argument can be shot down through the common observation of people who have exhausted their unemployment claims and still can't find work. The longer a person is unemployed, the longer it takes to find employment; or so that is what they say! The areas of manufacturing, construction, and investment banking are now the "weak" sectors of the economy and are facing more and more lay-off's. Major investment gurus and economic soothsayers like Jim Rodgers, Warren Buffett, John McAlveney are all saying that this recession (which we are in now) will NOT have a "soft landing" and will be deeper and longer than possible! Manufacturing, Investment banking, and construction are primarily male dominated and are the hardest hit jobs because of the Mortgage lending crisis and the resulting tightening of credit/lending. As for me, these statistics are meaningless because wives being the "breadwinner of the household" is a growing trend! When unemployment benefits "run out" the old saying kicks in, "out of sight, out of mind." Unemployment is greater then the statistics show because if the US Deparment of Labor connected with those individuals whose unemployment benefits were exhausted or run out; you would find that the unemployment statistics would be higher than 5.5%. I wouldn't be surprised if the TRUE unemployment rate would be closer to 8.0% or MORE!

2008 Jun 10 10:05 AM

[CLH:]

Depressed----You frighten me with 8%. Europe has had 8-10% for 20 years. I sure would hate to see us sink to the level of Europe.

Perry---Good article but the left is so scared and frightened that there is nothing you can say to to get them to come out from under the bed.

2008 Jun 10 10:28 AM

[Manifestor:]

I guess the "new rule" of recession is not negative GDP but the amount of FEAR prevalent. This could be either intrinsic (due to job loss or loss of house equity) or extrinsic created by media and bloggers. By that standard of course we are in a deep one already!

2008 Jun 10 02:15 PM

[whiplash1:]

Keep in mind that our population is increasing by 3 to 4 million per year, and the labor force continues to compete for limited jobs. This keeps wages down. How nice. We need to reduce immigration and births because they are the main reason we are in trouble. You can grow the economy indefinitely to accommodate increasing populations. But employers love this because wages tend to stay low.

Initiate a population policy and drastically reduce immigration. Other wise the consequences will be grave.

Any questions?

[e-mail]

2008 Jun 11 02:06 AM

[bill9300:]

prof, don't you live and work in Flint, Michigan one of the cities with the worst rate of unemployment in the USA. New claims are probably low there, as GM's shutdown of many plants and layoffs ended a few years back. BUT UNEMPLOYMENT IS HIGH, and the high paying jobs are gone.

someone posted-
"...As far as statistics showing that employment is steady and that there are fewer claims for unemployment for the months of..... That argument can be shot down through the common observation of people who have exhausted their unemployment claims and still can't find work. The longer a person is unemployed, the longer it takes to find employment; or so that is what they say! The areas of manufacturing, construction, and investment banking are now the "weak" sectors of the economy and are facing more and more lay-off's. .."

2008 Jun 14 08:09 AM