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US claimants recovery stalls

Today, I celebrate – my home town of Melbourne has recorded zero new infections for the first time since June 9, 2020 and zero deaths. But things are not so hot elsewhere in the world. As the US labour market started to rebound over the summer, I stopped updating my analysis of the claimants data horror story that had earlier demonstrated how sharp the decline in March and April had been. But I have still been monitoring it on a weekly basis and the information we are now getting from the US Department of Labor’s weekly data releases are indicating that as the virus escalates, seemingly out of control, the labour market recovery has all but stalled and a reasonable prediction would be that it will deteriorate somewhat if the infection rate leads to tighter restrictions (which it should). A relatively short blog post today (tied up with things today) – just some notes as I updated the data to see what was going on. The conclusions are obvious. Much more fiscal support is needed in the US, especially targetted at the bottom end of the labour market. Devastation will follow with the sorts of numbers that appear to be entrenched at present.

Here is the latest update (as for the week ending October 17, 2020) from the US Department of Labor’s weekly data releases for the unemployment insurance claimants.

The Department of Labor provides an archive of the weekly unemployment insurance claims data back to January 7, 1967 – HERE.

The weekly data can be found in the – UI Weekly Claims Report.

New claimants recovery stalled

The next graph shows the data for New claimants data from January 1, 2020 to October 17, 2020.

I had previously posted the full sample, which showed how insignificant the previous deep recessions of the early 1980s, 1990s and the GFC were by comparison with the current event.

But we get little information from seeing a huge vertical line dwarfing all previous observations. We know the scale.

This series provides the best information on the state of the labour market and reinforces the information we learned from the monthly payroll and labour force survey data, which showed that while employment was still growing in September, the rate of improvement has moderated significantly.

I analysed that data in this blog post – US labour market – floundering now despite modest gains (October 5, 2020).

The problem that the data on new (first-time) claimants for benefits demonstrates is that the weekly claims have not substantially declined since August, which tells me that employment growth is not fast enough to absorb the accumulated pool of jobless workers.

Continuing claims and covered unemployment rate

The other series, which is of interest is the continuing claims, which lags the new claims by a week.

The following graph shows that this series is dropping steadily and is now at 8.3 million. On March 7, 2020, the stock of continuing claims was 1,702,000 persons. So the figure has grown nearly 5 times.

The next graph shows the evolution of the insured unemployment rate, which measures the proportion of the labour force that is collecting unemployment benefits.

It fell from 6.4 per cent to 5.7 per cent which might on the surface suggest an improving situation.

However, the monthly labour force data (see link to my analysis above) showed that the decline in the unemployment rate was mostly driven by a fall in the participation rate, which effectively means that the official unemployed are becoming hidden unemployed outside the labour force measure.

Bringing together the archived data and the most recent release (October 17, 2020), the following table tells the story for those who like numbers.

Week ending Initial Claims (SA) Weekly Change Cumulative sum since March 7, 2020
March 7, 2020 211,000 -6,000 n/a
March 14, 2020 282,000 +71,000 282,000
March 21, 2020 3,307,000 +3,025,000 3,589,000
March 28, 2020 6,687,700 +3,560,000 10,456,000
April 4, 2020 6,615,000 -252,000 17,071,000
April 11, 2020 5,237,000 -1,378,000 22,308,00
April 18, 2020 4,442,000 -795,000 26,750,000
April 25, 2020 3,867,000 -575,000 30,617,000
May 2, 2020 3,176,000 -691,000 33,793,000
May 9, 2020 2,687,000 -489,000 36,480,000
May 16, 2020 2,446,000 -241,000 38,926,000
May 23, 2020 2,123,000 -323,000 41,049,000
May 30, 2020 1,897,000 -226,000 42,946,000
June 6, 2020 1,566,000 -331,000 44,512,000
June 13, 2020 1,540,000 -26,000 46,052,000
June 20, 2020 1,482,000 -58,000 47,534,000
June 27, 2020 1,408,000 -74,000 48,942,000
July 4, 2020 1,310,000 -98,000 50,252,000
July 11, 2020 1,308,000 -2,000 51,560,000
July 18, 2020 1,422,000 114,000 52,982,000
July 25, 2020 1,435,000 13,000 54,417,000
August 1, 2020 1,191,000 -244,000 55,608,000
August 8, 2020 971,000 -220,000 56,579,000
August 15, 2020 1,104,000 133,000 57,683,000
August 22, 2020 1,011,000 -93,000 58,694,000
August 29, 2020 884,000 -127,000 59,578,000
September 5, 2020 893,000 9,000 560,471,000
September 12, 2020 866,000 -27,000 61,337,000
September 19, 2020 873,000 7,000 62,210,000
September 26, 2020 849,000 -243,000 63,059,000
October 3, 2020 767,000 -82,000 63,826,000
October 10, 2020 842,000 75,000 64,668,000
October 17, 2020 787,000 -55,000 65,455,000

Past Recessions Comparison

I wondered what the behaviour of this time series had been in past recessions. The data goes back to January 1967, which means it covers 8 official US recessions.

I started the indexes at 100 for each recession in the week where the lowest claimant count occurred before the recession began and then graphed the index out to 40 weeks, which is the duration of the current COVID recession.

The following graph covers the 7 official recessions up to and including the GFC.

I decided to graph the COVID episode separately because it completely obliterates any of the past dynamics in amplitude.

As you can see, the pattern is very similar for all these events (with some variational spikes).

Here is the graph for the COVID period. Stunning.

The spatial patterns

The following Table presents the most recent data to October 10, 2020 for the US states.

It shows the cumulative claims since February 26, 2020 to October 10, 2020 in total and as a percentage of the State’s working age population, as well as the insured unemployment rate.

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Conclusion

Without further fiscal support, I suspect the situation will become very grim in the US as the pace of the recovery has slowed and this locks in those who lost jobs at the beginning of the crisis to a long period of joblessness.

That is enough for today!

(c) Copyright 2020 William Mitchell. All Rights Reserved.

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