Don't believe hype about drop in unemployment claims
COMMENTARY Unemployment claims dropped unexpectedly this week for a second week in a row. This, along with last month's lower unemployment rate, suggests the recovery is jobless no more. Don't break out the low-price champagne just yet, though. There are still serious problems around people finding work and Washington knows it.
This week saw initial claims for state unemployment benefits dropping 13,000 to a seasonally adjusted 348,000, according to Labor Department, the lowest since March 2008. This just means fewer people are losing their jobs.
However, the number of people continuing to collect jobless benefits dropped by 100,000 last week to 3.43 million, the fewest since August 2008. The continuing claims figure doesn't include workers receiving extended benefits under federal programs. That number has also shrunk recently. As of Jan. 28, those collecting emergency and extended payments decreased by about 22,800 to 3.48 million. This is one reason the national unemployment rate dropped to 8.3 percent last month.
Another reason is that some of those who are no longer getting extended benefits have given up and are no longer counted as part of the work force. Even Fed Chair Ben Bernanke was forced to admit this. He told Congress last week, "It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work. There are also a lot of people who are either out of the labor force because they don't think they can find work."
By Mike Shedlock's count - which I trust - the labor force is smaller now than when the recession technically ended 2.5 years ago. In June 2009, the labor force was at 154,730,000 people; the current number is 154,395,000. Just looking at the demographics of the number of people entering the workforce and the number of people retiring that number should be close to 160,000,000.
In addition to people dropping out of the workforce there is the issue of "seasonally adjusting." I was going to crib from Charles Biderman on this, but why not just quote him:
The BLS each month reports two data series, but only one jobs number is reported by the media. Actual jobs outstanding, not seasonally adjusted, are down 2.9 million over the past two months. It is only after seasonal adjustments - made at the sole discretion of the Bureau of Labor Statistics economists that 2.9 million less jobs gets translated into 446,000 new seasonally adjusted jobs for January and December.
Some people have accused the Obama administration of skewing the numbers in its favor. It probably has, just like every other administration.
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