Tepid Economic Recovery: The iM-Weekly Unemployment Monitor: Update 3/5/2021

Summary

• A truer picture of the employment situation is extracted from the Unemployment Insurance Weekly Claims (UIWC) report.
• Persons receiving some form of unemployment benefit account for 11.3% of the labor force.
• Monitoring of the weekly insured unemployed could provide early indication of recovery from the Covid-19 crisis.
• The current UIWC indicates that the economic recovery from the Covid-19 crisis seems to have stalled.

The economic recovery from the Covid crisis remained tepid. BLS Employment Situation Report shows that the unemployment rate dropped 0.1% to 6.2%. The BLS reports 9.972 million are unemployed whereas the DOL reports that 18.027 million persons receive some form of unemployment benefit, or 11.25% of the labor force.

The DOL reported on 3/4/2021 unadjusted initial claims totaled 748,078 (or 0.53% of covered employment) in the week ending February 27, an increase of 31,519 from the previous week. The 50-year long-term average of initial claims as a percentage of Covered Employment (January 1971 to today) is 0.38%, and the average of the last business cycle (July 2009 to March 2020) is 0.24%

The advance unadjusted level of insured unemployment in state programs totaled 4,806,269, a decrease of 22,355 from the preceding week.

However, the total number of people claiming benefits in all programs for the week ending February 13 was 18,026,537, a decrease of 1,018,763 from the previous week.

These reported numbers, which are graphed below, indicate:

1. A stagnant situation in the return to work trend (the green line near horizontal for the past six weeks) indicating no meaningful improvement of the Covid-19 recession.
2. That the lowest unemployment rate should be 11.3% (blue line), and if one added the historical 2.6% UCR-PCR spread, then the actual unemployment rate should be 13.9%.

In the current Covid-19 situation, we believe that the only meaningful figures from DOL’s weekly report are:

• The non-seasonal adjusted Insured Unemployed.
• The total of all persons claiming unemployment benefits in all programs, which includes persons receiving Covid-19 relief who would normally not fall into the insured employed, e.g. self-employed tech workers.

In the figure above we graph the following:

• The monthly unemployment rate (UER) as published by the BLS, plotted 2 weeks earlier from the reporting date. (The May UER which is published beginning June is plotted from mid-May to mid-June).
• The insured unemployed rate (IUR) is the percentage of insured unemployed persons (not seasonally adjusted) of the labor force. (The number of insured unemployed is published every Thursday, looking back two weeks in the DOL’s weekly Unemployment Insurance Weekly Claims report. The labor force is published monthly by the BLS with the Employment Situation Summary).
• The unemployed persons claiming rate (PCR) is the percentage of persons of the labor force claiming UI benefits in all programs, including the insured unemployed. (The total number of persons claiming benefit is published weekly looking three weeks back).
• The spread UER-IUR historically at 2.6% (2019 average).
• The spread UER-PCR also historically at 2.6%, as the majority of persons claiming benefit were the insured unemployed.

A recovery would be indicated by the following:

• Significant and continuous decline in the insured unemployment rate, together with a.
• significant decline of total persons claiming benefit, which implies,
• the spread UER-PCR approaching its historical value of 2.6%.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.