Jobless Claims Report – Latest Weekly Tally is Distorted, Evaluate Data with Care
Initial jobless claims fell 47,000 to 522,000 during the week ended July 17. This estimate reflects distortions from seasonal factors and should be interpreted with care. Seasonally unadjusted initial jobless claims advance in July each year because auto plants shut down for retooling. The seasonal factors generated from this expected event were used in the latest weekly jobless claims report. However, this year the bankruptcy and inventory issues of the car industry led to early shutdowns of auto plants, which resulted in seasonally unadjusted jobless claims advancing much earlier than expected and has led to an exaggeration of the decline in seasonally adjusted jobless claims in recent weeks. The important point is that folks who would have filed for unemployment insurance in prior years in the month of July have done this earlier in 2009. From Chart 1, the main message is that the rate of job losses has slowed, but initial jobless claims data overstate the case.
Continuing claims, which lag initial claims by one week, fell 642,000 to 6.273 million and the insured unemployment rate dropped to 4.7% from 5.2%. These data should also be viewed with care because recipients qualify under the Extended Benefit (EB) Program and Emergency Unemployment Compensation (EUC) Program (see chart 3) after the 26 week period of receiving unemployment insurance under the regular state programs. Data pertaining to recipients under the EUC and EB programs are delayed and are currently available until June 27, 2009.
The daily comment of July 9 included details of the Extended Benefits (EB) program and the Emergency Unemployment Compensation (EUC) program. Further clarifications are in order today. The Emergency Unemployment Compensation (EUC) program is a federally funded program which has been effective since June 30, 2008, with unemployed individuals eligible to stay in the program until May 2010 and new entrants permitted until December 31, 2009. The EUC program kicks in after the regular unemployment compensation period of 26 weeks has expired. This program consists of two tiers of duration of unemployment compensation -- 20 weeks and 13 weeks. The Department of Labor spokesperson noted that all states are under the EUC program currently and 46 states are under the second tier of the program. The EB program is a statutory program (13 weeks or 20 weeks in duration depending on trigger of unemployment rate for the program which varies in each state) funded by the federal government and is triggered if a state has a very high jobless rate. Thirty four states are currently disbursing unemployment compensation under the EB program. In sum, unemployment compensation is available in a sequential order of regular state programs, EUC program, and EB program. The continuing claims data includes only those under the regular state programs and excludes the number of recipients under the EUC and EB programs. Therefore, a complete tally of continuing unemployment claims should combine the count under the regular state program and the federally funded (EB and EUC) programs. Our calculations indicate that this combined total is 8.8 million on a seasonally unadjusted basis as of the week ended June 27, a significant increase from the 2.86 million reading a year ago. The severity of employment conditions, indicative in these numbers, supports expectations of a lackluster recovery.
Home Builders Index Improves in July
The Housing Market Index (HMI) of the National Association of Home Builders increased to 17 in July from 15 in June. The historical low for the HMI (8.0) was established in January 2009. The Prospective Buyers Index rose to 14 in July from a low mark of 7 in December 2008.
