Thursday, July 8, 2010

Weekly Claims For Unemployment Insurance: Keep Your Eye Out For Criminals

Weekly Claims for Unemployment Insurance tracks new filings for unemployment insurance benefits.
Figures on new filings for unemployment benefits are released every week and are based on reports from state agencies.  Because of this it is considered a good coincident indicator, or an indicator that actively reflects what is going on in the economy.  Its also considered forward-looking because first-time claims can influence future economic activity.  If a large number of workers are losing their jobs every week and applying for unemployment insurance, this will eventually doom consumer sentiment, slash spending, and cause business to cut back investments.  If the number of people filing for unemployment benefits increases every week or remains at a high level, it indicates that the economy is struggling. 

The report can be found here.  First look at the Unemployment Insurance Data for Regular State Programs.  The general rule of thumb has been that if first-time claims stand above 400,000 for several weeks, it is a symptom of an economy that losing traction and in danger of slipping into recession.  Also this pace usually drives the unemployment rate higher.  For their to be any meaningful jump in payroll employment, first-time claims must remain below 350,000.  For July 3rd initial claims stood at 454,000 down -21,000 from 475,000 on June 26 from last week.

We want to look at the four-week moving average to smooth out the volatility of the weekly numbers. This was 466,000 for July 3rd which is down 1,250 from 467,250 June 26.  The numbers have continued to remain at a very high level which is a bad sign for consumer confidence and spending.

 Insured unemployment vs. total unemployment:

Looking at this graph we can see the growing disparity between those unemployed and those receiving unemployment insurance benefits.  Jobless workers collecting unemployment insurance at least have some money to spend, which can dampen the harmful effects of an economic downturn.  If total unemployment rises at a faster rate than those collecting unemployment insurance, it means a growing proportion of people out of work may have to get by without any state financial support.  This can lead to more people turning to the underground economy or crime for money.  Furthermore, the stress facing many state budgets has led to a massive reduction in police forces.  I'll be keeping my eye out for the hamburglar.

1 comment:

  1. Maybe MCdonald's should bring back their old saying you deserve a break today at mcdonalds. But change it to you deserve a job today at mcdonalds.