Unemployment Claim Numbers: What Do They Mean?

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Thursday, 14 October 2010 08:19

Weekly unemployment claims jumped by 13,000 to 462,000 last week. The 4-week moving average is at 459,000. This suggests that the economy is still not generating jobs. Following the last downturn, the economy did not start generating jobs consistently until weekly claims had fallen to near 400,000.

It is also worth noting that the unemployment insurance filings may be lower relative to the number of layoffs each week than was true in the past. The reason is simple: because of prolonged high unemployment, many workers who are newly laid off are not eligible for benefits.

Requirements vary by state, but most look back at a workers history over either the prior 4 quarters or the 4 quarters prior to the most recent quarter. To qualify, workers need some minimum number of work hours (e.g. 500 to 600 hours) or minimum earnings (e.g. $2,500 to $3,000) over the relevant 4 quarters.

Either 4 quarter period is a time in which unemployment was quite high. Furthermore, while unemployment has hit everyone, it has hit some groups especially hard. The unemployment rate for workers with just a high school degree has averaged almost 10.5 percent for the last 12 months. For workers without a high school degree it has averaged almost 15 percent. For workers between the ages of 20-24 it has averaged almost 15 percent.

Many of the people who got laid off last week may have just recently been hired after an extended spell of unemployment. This means that they would not qualify for benefits. This is always true for some number of the newly unemployed, but that share would be much larger today than it had been in 2007 when the unemployment rate had been under 5.0 percent over much of the prior 12 months.

It is not clear how much this would affect unemployment claims, which is the number reported each month. This number gives the number of people filing, not the number who are determined to be eligible. It is likely that many ineligible workers go ahead and file, not realizing that they ineligible. 

However, some workers undoubtedly understand the system and don't bother filing. We don't know how large this number is, but if it is 5 percent of the newly unemployed, that would correspond to nearly 25,000 additional claims a week. This implies that the 461,000 claims filed last week would correspond to roughly 485,000 claims filed three years ago, before the long period of high unemployment had set in.