First-time jobless claims declined to a seasonally adjusted rate of 881,000 for the week ending Aug. 29, with non-seasonally adjusted claims falling to 833,000 as the Department of Labor introduced a new way to estimate the pace of firings in the domestic labor market.
Even with the adjustment, claims remain at historically high levels.
At the same time, the federal Pandemic Unemployment Assistance claims increased by 759,482, meaning that the number of people filing claims for the week ending Aug. 29 increased by 1,640,482 when the seasonally adjusted number is included. That figure is 1,592,834 when the non-seasonally adjusted number is used, according to the report released by the U.S. Labor Department on Thursday.
We have mentioned this before: A decrease in filings at elevated levels, caused largely due to a methodological adjustment, is akin to turning down the heat in hell. These numbers are far worse than anything noted during the Great Financial Crisis and the increase in federal Pandemic Unemployment Assistance filings is more than somewhat concerning.
Through the week ending August 15, there were 29,224,000 people claiming unemployment benefits in all programs, up from 27,028,000 previously. That increase was largely due to the increase in PUA filings. Continuing claims eased to 13.2 million, and the implied unemployment rate declined to 9.1% on a seasonally adjusted basis, and 9% using a non-seasonally adjusted rate.
This week’s reporting of first-time claims for unemployment benefits incorporated a change in the seasonal adjustment methodology to better reflect seasonal hiring and firing during the pandemic.
Seasonal factors include (in their simplest form) the hiring of lifeguards in the late spring and then layoffs of those workers when beaches are closed in early fall. Other examples include the hiring of school employees in the fall and layoffs in the spring, or the hiring of construction workers in the spring, followed by layoffs during the coldest months of winter.
We show this in the first figure below, with the red bars indicating the actual filing of initial jobless claims, which range from 150,000 to 350,000 claims per week over a normal two-year period.
The wide range of outcomes makes it difficult to assess the pressure on the labor market and the direction of economic growth in any given week. So instead of focusing on the actual numbers, the Labor Department and the financial markets focus on the seasonally adjusted value of weekly first-time claims, which we show as the black line and which normally falls within a range of 200,000 to 250,000 claims per week.
The methodology used by government statisticians applied a multiplicative factor to account for the seasonal changes in the number of filings relative to the size of the labor force. This methodology is applicable during normal times.
But these are not normal times. As we show in the second figure, the coronavirus outbreak forced an overnight shutdown of the economy, the quarantine of the population and widespread furloughing of employees accompanied by first-time filings for unemployment benefits that reached 7 million in a single week in April. During August, weekly jobless filings averaged 1 million newly filed claims per week.
Applying a multiplicative adjustment to claims that are more than five times greater than normal does not make sense at this point. After all, there are only so many lifeguards to be furloughed and a finite number of school employees being added to the payrolls. So the Department of Labor is switching to an additive adjustment for filings in the last week in August and will reassess its methodology and historical data at the start of the new year, as it normally does. Click here for the Department of Labor explanation.
For this reason, the new methodology was responsible for the drop in the number of seasonally adjusted first-time filings, though not that much of a difference. The seasonally adjusted filings have been slightly higher than actual filings for much of the 24 weeks of the pandemic, and we would think an additive adjustment lessens that difference.
Total recipients of unemployment assistance
Through the week ending Aug. 29, there were 13.2 million people receiving unemployment benefits and 759,482 received benefits via the federal pandemic assistance program.
