Wednesday, January 5, 2011

Initial Claims for Unemployment Insurance and the Business Cycle

The reliability of initial claims in predicting employment fluctuations depends on the state of the business cycle.  While generally very useful in forecasting employment during recessions, very early on in recovery however, they lose their predictive value.  This is because initial claims for unemployment are an important measure of layoffs, but changes in overall employment depend on both layoffs and hiring. 
Employment can fluctuate for one of three reasons: firms are hiring workers, firms are laying off workers, or workers decide to quit.  Claims provide us with a window into the layoff side of the labor market, but in order to paint the whole picture we need to also analyze the other main component- hiring- over the course of the business cycle.   
During recessions a strong inverse relationship exists as initial claims rise and hiring receeds.  During upturns, however, the systematic relationship between claims and hiring found during recessions virtually disappears, suggesting that layoffs are being driven by factors that differ from those driving hiring decisions.  Since hiring overshadows claims and claims move independently of hiring, claims alone cannot tell us much about the overall direction in employment. 
Thankfully, economic theory does not leave us hanging.  Because training new employees can be expensive, firms are often reluctant to fire workers as a way to cut costs and will tend to do so only when no other option is available.  During expansions, when hiring rates are high, firms are more likely to adjust to a slowdown in economic activity by hiring fewer workers than by laying off existing workers.  In contrast, during recessions, many firms seek to reduce the number of employees on their payrolls.  In implementing such cutbacks, these firms will be forced to hire fewer new workers and to lay off part of their existing workforce.

In light of this information we should be looking at hiring to determine where employment will be heading, not just initial claims.  So even though initial claims came in under 400,000 all that really means is that firms are laying off less workers versus hiring a ton of new workers.  Here is a graph of total private hires (right axis in thousands) vs. a 4-week moving average of initial claims (number on left hand side).  




Although hiring has yet to come up significantly it is important to note the data cuts off after october so it maybe misleading.  Nonetheless even with 'fresher' data we could still assume that we have a long way to go before our precious unemployment rate is brought down.  Another important indicator to look at when deciding whether the employment picture might turn is average weekly hours, but I'm feeling too lazy to put a graph of that up.        

References:

All the data for my graph came from FRED (Duh!).

McConnell , Margaret M. “Rethinking the Value of Initial Claims as a Forecasting Tool”. From the Federal Reserve Bank of New York’s Current Issues In Economics and Finance; November 1998, Volume 4/Number 11. 


20 comments:

  1. hello guys I found your website from google, after I read your story I wanted to comment a little, that your writing is very inspiring and Creative, so keep writing and good writing

    ReplyDelete
  2. Unemployment insuramce has prevented much hardship.

    ReplyDelete
  3. I believe what you posted made a lot of sense. However,
    what about this? suppose you composed a catchier title?
    I am not suggesting your content is not good.

    , but what if you added something to maybe get a person's attention? I mean "Initial Claims for Unemployment Insurance and the Business Cycle" is a little plain. You could look at Yahoo's home page and watch how they create post titles
    to get viewers interested. You might try adding a video or
    a pic or two to grab readers interested about everything've written. Just my opinion, it would make your posts a little bit more interesting.

    my website: ilflussocatalizzatore.it

    ReplyDelete
  4. Hey! I just wanted to ask if you ever have any issues
    with hackers? My last blog (wordpress) was hacked
    and I ended up losing months of hard work due to no backup.
    Do you have any solutions to stop hackers?

    Feel free to surf to my page :: Workouts To Jump Higher

    ReplyDelete
  5. I do not even know the way I stopped up right here, however I thought this submit
    used to be good. I don't understand who you might be but definitely you're going to a famous blogger in
    the event you are not already. Cheers!

    Here is my web-site travel.state.gov

    ReplyDelete
  6. I'm impressed, I have to admit. Rarely do I come across a blog that's both
    equally educative and amusing, and without a doubt, you've hit the nail on the head. The problem is something which not enough men and women are speaking intelligently about. I'm
    very happy that I stumbled across this in my hunt for something relating to this.


    Stop by my page ... workouts to increase vertical jump

    ReplyDelete
  7. Write more, thats all I have to say. Literally,
    it seems as though you relied on the video to make
    your point. You obviously know what youre talking about, why waste your intelligence on just posting
    videos to your weblog when you could be giving us something enlightening to read?



    Feel free to visit my website: exercises to improve vertical leap

    ReplyDelete
  8. What's Happening i'm new to this, I stumbled upon this
    I have found It absolutely helpful and it has helped me out loads.
    I am hoping to give a contribution & aid different customers like its aided me.

    Great job.

    Feel free to surf to my blog post - workouts to increase vertical jump

    ReplyDelete
  9. Does your website have a contact page? I'm having trouble locating it but, I'd
    like to shoot you an email. I've got some creative ideas for your blog you might be interested in hearing. Either way, great website and I look forward to seeing it expand over time.

    Feel free to surf to my webpage: vertical jump exercises

    ReplyDelete
  10. Most of the insurance companies have market share in stock markets their policies benefits depends on how their shares perform in the stock markets . So before taking any insurance check whether the stocks of company is performing well in stock market .Claims Pages

    ReplyDelete
  11. đồng tâm
    game mu
    cho thuê nhà trọ
    cho thuê phòng trọ
    nhac san cuc manh
    số điện thoại tư vấn pháp luật miễn phí
    văn phòng luật
    tổng đài tư vấn pháp luật
    dịch vụ thành lập công ty trọn gói
    lý thuyết trò chơi trong kinh tế học
    đức phật và nàng audio
    hồ sơ mật dinh độc lập audio
    đừng hoang tưởng về biển lớn ebook
    chiến thắng trò chơi cuộc sống ebook
    bước nhảy lượng tử
    ngồi khóc trên cây audio
    truy tìm ký ức audio
    mặt dày tâm đen audio
    thế giới như tôi thấy ebook

    - Nếu điều độ hợp lý hẳn là miễn cưỡng có thể.
    - Cũng nên xử lý thôi - Con mắt của Lưu Phong hiện lên một đạo sát ý - Tiểu muội, ngươi muốn nhân cơ hội này một lần thay máu không?"
    Bạch Vũ hỏi:
    - Đại ca, lời này của ngươi là ý tứ gì?
    - Đã có câu một thiên tử, một triều thần, cha và huynh muội đã không còn, bây giờ nếu ngươi là chưởng quản của Bạch gia, thì toàn bộ lực lượng do ngươi tự quản. Bọn họ muốn nhân cơ hội này phế đi ngươi, tại sao chúng ta cũng không nhân cơ hội này, phản lại, phế bọn họ đi.
    - Công tử có ý muốn nhân cơ hội này trừ bỏ bọn họ? - Đỗ Tam đã nghe ra ý tứ của Lưu Phong.
    Phong hỏi.
    Lưu Phong suy nghĩ một chút, nói:
    - Tôi làm một phong thư, ngươi phái người giao cho Vương Bảo Nhi, ta tự có chủ ý - Nói xong Lưu Phong từ trong ngực lấy ra một cây bút, rất nhanh viết một phong thư, kêu Đỗ Tam mang đi.
    Đỗ Tam sau khi đưa tin, Vương Bảo Nhi nghe nói thư do chính Lưu Phong viết, vội vàng hai tay tiếp nhận, chăm chú đọc, sau đó nói cho Đỗ Tam biết mọi chuyện cứ yên tâm, mình sẽ lo liệu hết.
    Đỗ Tam gặp đường đường công tử của Thủ bị phủ đối với Lưu Phong rất cung kính, trong lòng không khỏi kinh ngạc, đoán chừng Lưu Phong là người có địa vị to lớn. Trách không được hắn đối Tam gia cùng Quế Tẩu có vẻ bất mãn.
    Mang tin quay lại, Đỗ Tam thấy Bạch Vũ mặt tươi cười, tự mình cũng thở dài một hơi, xem ra tiểu thư tuy nhỏ, nhưng cũng có năng lực quản Bạch gia.
    ***
    - Tiểu thư có chuyện tình, ta không biết có nên hay không nói?
    Chuyện thương hội không cần lo lắng, tâm tình Đỗ Tam cũng tốt lên rất nhiều,

    ReplyDelete
  12. There are plenty of dissertation web sites over the internet while you obtain not surprisingly detailed in the webpage. https://thumannagency.com/

    ReplyDelete
  13. Extra security is really a standout amongst probably the most significant areas of any person's money related arrangement. Anyway there's parcel of misconception about life coverage, essentially due to the way disaster protection items have been sold throughout the years. http://buiteninsurance.com/individual-insurance/lifehealth/

    ReplyDelete
  14. Positive site, where did u come up with the information on this posting?I have read a few of the articles on your website now, and I really like your style. Thanks a million and please keep up the effective work
    mua bảo hiểm bắt buộc xe ô tô ở đâu

    ReplyDelete
  15. I’m going to read this. I’ll be sure to come back. thanks for sharing. and also This article gives the light in which we can observe the reality. this is very nice one and gives indepth information. thanks for this nice article... Insurance Marble Falls

    ReplyDelete
  16. Technology is vital to the existence and competitive edge of any company. I believe that's the great understatement of the year. Look at what technology allows us to do as compared to 30 years ago; now think back about five years, we've come a long way. spy phone

    ReplyDelete