Initial Unemployment Claims Data Gets Back on Track

[This continues an 18 month series of posts on the unemployment problem: previous posts can be found at Ace of Space HQ and Innocent Bystanders]

The DoL released the latest unemployment claims data this morning. The number dropped from 457K last week to 415K this week, which is much more line with the trend we’ve seen since last August (see the chart below). If that trend continues, we should see some real improvement in the jobs situation around the beginning of Fall (when the number of new claims gets to 300K to 350K).

If you’ve never seen this chart before, here’s a brief explanation:

Initial unemployment claims are a measure of how many people are newly laid off. Obviously you want that number to be small – in the years just before the recession, for instance, it was running at around 300,000. At the peak of the layoffs it hit 650,000, so the question is: how long until the claims drop down to the 300,000 – 350,000 range? I.e., when will be at a point where the unemployment picture improves?

I started plotting this data back in April 2009, when the number of new claims was dropping fairly rapidly. This was good news: it looked like we’d start to see the unemployment rate drop by the summer of 2010. But then something happened. In December 2009 I started noticing that the data was wandering away from my nice line. It kept on wandering, so I kept adjusting my prediction of when unemployment would start improving. It kept getting farther and farther away.

By April 2010 I was convinced that it wasn’t just a slowdown – something dramatic had happened that had pretty much stopped the improvement in the claims data. When I looked at possible events that might have caused this, I found that Pelosi’s introduction of the Obamacare bill came just a few weeks before the data took its sudden turn. My belief is that businesses reacted quickly to the threat of increased costs and regulation, and froze hiring.

But then, after 9 months of doldrums (which ran right through the “Recovery Summer,” and which the press pretty much ignored), the data started heading downward again. Looking at events of that time, I’d like to think that it was the point at which GOP control of the House looked pretty definite that encouraged businesses to loosen up a bit.

For the past 6 months, the claims data has continued to improve. But will the trend continue?

[Cross-posted at Uncommon Misconceptions]

One thought on “Initial Unemployment Claims Data Gets Back on Track

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s