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Big Setback for the Unemployment Crisis: Week 24 of U.S. Labor Market Collapse

big setback for the unemployment crisis week 24 of u s labor market collapse

Continued unemployment claims jumped by 2.2 million to 29.2 million, worst since Aug 1, as claims by gig workers under federal PUA program soar. State plus federal initial claims jumped to 1.59 million “not seasonally adjusted.” 18.3% of labor force on unemployment insurance.

By Wolf Richter for WOLF STREET.

Powered by a nasty jump in continued unemployment claims under the federal Pandemic Unemployment Assistance (PUA) program for contract workers, established under the CARES Act, total continued claims under all state and federal programs jumped by 2.2 million, “not seasonally adjusted,” to 29.2 million people on unemployment rolls, the highest since August 1, according to the Department of Labor this morning.

The Labor Department last week announced a major change in how it would figure “seasonally adjusted” unemployment claims because they’d gone rogue during this crisis. I stopped reporting “seasonally adjusted” claims in May for that very reason, and focused exclusively on “not seasonally adjusted” claims. So what you have seen here since May, and what you see here today, are “not seasonally adjusted” claims and they were not impacted by the Labor Departments Change (more in a moment):

These 29.2 million people, “not seasonally adjusted,” who continued to claim unemployment insurance (UI) under all programs translate into 18.3% of the civilian labor force (160 million, according to the Bureau of Labor Statistics).

Blue columns – continued claims under state programs:

The number of people who continued claiming UI under state programs fell by 764k to 13.1 million (not seasonally adjusted), along the downtrend that began in May.

Red columns – continued claims under federal and other programs:

The number of people on UI under all federal programs established by the CARES Act and some other programs soared by 2.97 million (not seasonally adjusted):

  • Federal PUA claims soared by 2.60 million to 13.57 million. The Pandemic Unemployment Assistance program covers contract workers, the self-employed, gig workers etc. who’d lost their work. This was driven by a 2.3-million jump in continued PUA claims in California.
  • Federal PEUC claims ticked down to 1.39 million. The Pandemic Emergency Unemployment Compensation program covers workers not covered by other programs.
  • State Extended Benefits declined by 46k to 168k.
  • State STC / Workshare fell to 270k (employer avoids layoffs by reducing the number of regularly scheduled hours of work; employees receive some wages plus a pro-rata share of weekly benefits).
  • Federal Employees ticked up to 14.0k continued claims.
  • Newly Discharged Veterans ticked up to 13.7k continued claims.

The newly-laid off workers: Initial UI Claims, state & federal:

Initial claims under state programs rose by 7k to 833k, “not seasonally adjusted,” in the week ended August 29. They’ve been in the same range over the past four weeks, with no improvement.

Initial claims under the federal PUA program for contract workers jumped to 759k, from 608k in the prior week (not seasonally adjusted).

State plus federal PUA initial claims combined jumped to 1.59 million people, not seasonally adjusted, who’d newly lost their work and filed for unemployment insurance during the week. This translates into a monthly rate of 6.8 million people who newly lost their jobs!

Labor Department’s fix of “Seasonal Adjustments” that had gone rogue.

In May, it became clear to me that seasonal adjustments were wildly distorting unemployment claims, and I switched to discussing only “not seasonally adjusted” unemployment claims, which is what you see here. Last week, the Labor Department explained why these adjustments had gone rogue and how it would change its method of figuring “seasonally adjusted” claims starting today. And it did.

Just how rogue these seasonal adjustments had gone is demonstrated by this chart that shows the difference between “seasonally adjusted” initial claims and “not seasonally adjusted” initial claims. The difference should be in line with the seasonality of the labor market. The largest seasonal factor is the surge in unemployment claims in late December and January (the big dips in the chart), following the surge in hiring during the holiday shopping season. But during the current unemployment crisis, those adjustments went rogue:

In the chart, you can see that the entry for this week dropped as a result of the new system of figuring seasonal adjustments, and is now about where it was last year in this week. So it seems the fix of “seasonal adjustments” is working. However, I will continue to report “not seasonally adjusted” claims at least until the dust settles.

A sort of sector rotation of layoffs, and it’s not a good sign, even as millions of lower-wage workers are being hired back. Read... The Second Wave of Layoffs is Here, Now Hitting Well-Paid Jobs

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