It’s been a few years since I last featured the pair of charts above showing: a) the number of jobless claims vs. the size of the US labor force (top chart), and b) jobless claims as a share of the US labor force (bottom chart), both updated through May 2015 with the most recent data for May (BLS data here and here).
The top chart shows why unadjusted jobless claims are very misleading: the size of the US labor force has more than doubled over the last 42 years, from 76.6 million in 1967 to the current level of almost 157.5 million Americans. The bottom chart shows jobless claims adjusted for the size of the US labor force, which have been steadily declining since 2009. Jobless claims averaged 272,950 in May, which is 0.173% of the May labor force of 157,469,000, and the lowest level since the Department of Labor started reporting monthly jobless claims in 1967. Compared to the most recent peak of 0.424% in March of 2009 during the Great Recession, adjusted jobless claims have fallen consistently to the current historic low-level of 0.173%.
This measure of initial jobless claims, adjusted for the increasing size of the US labor force over time, shows that jobless claims peaked during this recession above the levels of the last two recessions (1990-1991 and 2001), but were never anywhere close to the levels of the previous three recessions in the mid-1970s and early 1980s, and about the same as the 1969-1970 recession. The sharp reduction in adjusted jobless claims from the March 2009 high of 0.424% follows the same pattern of sharp reductions at the end of each of the last six recessions.
Bottom Line: Jobless claims, when adjusted to account for the size of the US labor force, have now fallen to the lowest level in history. Conditions in today’s labor market are actually slightly better than the unadjusted claims would suggest, especially when compared to previous economic recoveries. It’s amazing that so much attention is paid every Thursday to an important economic variable (initial jobless claims) that really has no meaning unless it’s adjusted to account for the size of the US labor force.
For example, see news reports today from Bloomberg, Fox Business, Wall Street Journal, Reuters, and the Washington Post — none of them ever mention that the raw, unadjusted weekly jobless claims are rather meaningless without comparing them to the labor force, nonfarm payrolls or the size of the US population. To understand how deficient the unadjusted jobless claims figures are, it would be like the Bureau of Labor Statistics reporting the number of unemployed workers every month, without ever calculating the unemployment rate (number of unemployment divided by the labor force)!
from AEI » Latest Content http://ift.tt/1BOSKgQ
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