Monday, February 2, 2015

Less Jobless Claims may not be "Good News"

It just means less unemployed people are receiving unemployment insurance benefits, and not that everybody is finding a job.

The New York Times recently reports that (as per the Department of Labor) fewer Americans filed new claims for [State] unemployment benefits last week — the lowest level in nearly 15 years — and that this news was "adding to bullish signals on the labor market" — because initial claims for state unemployment benefits dropped to 265,000 (the lowest since April 2000).

But almost 9 million Americans are still reported unemployed — and thousands more are leaving the labor force every month, and so, are no longer even counted in the unemployment rate. So what's all this talk about "bullish signals on the labor market"?

We've heard similar reports and stories by the media over the past 6 years, since the Great Recession "officially" ended in June 2009 — even when the national unemployment had peaked at over 10% in September of 2009 — when 15.7 million Americans were reported as "unemployed".

But just since June 2009, over 11 million more Americans have left the labor force. (and not counted as "unemployed"). And not all of those who dropped out of the labor force were retirees or disabled people — they were younger (18-24) and prime-age (25-54) workers. Only a little over 1 million Americans a year are either retiring (at 62 and over) or have gone on disability (SSA data here).

Just last December alone, a half a million people dropped out of the labor force. Imagine being 18-years-old without a college degree and never finding that very first job. According to the BLS survey, after being unemployed for a certain given time, eventually you too will leave the labor force, even though you were NEVER employed. (Because the BLS survey claims you stopped looking for a job.)

It should also be noted that most unemployed people don't quality or receive unemployment benefits (some, who might otherwise quality, don't even file a claim). Even the New York Times noted this: "The number of people still receiving benefits after an initial week of aid fell by 71,000 to 2.39 million in the week that ended Jan. 17." (That's out of almost 9 million still unemployed.)

And when someone's 26 to 12 weeks of State unemployment benefits have expired, it doesn't necessarily mean they found work — it could just mean that they no longer have an income. But the New York Times says that, because fewer people filed unemployment claims, this "bolsters views that the labor market is tightening". (If this were true, and there was such a big demand for labor, then where are all the wage hikes?)

Think of a big "people conveyor belt". First a newly laid off person gets on, then rides it for a while (maybe while also collecting unemployment benefits) and still being counted as "unemployed", until eventually, they reach the very end of this "people conveyor belt". That's when they are dumped into a big pile at the other end called the "not in the labor force" statistics. This pile has grown by 11 million since the "official" end of the Great Recession.

The fact is, not enough people — those who are graduating from high school (3 million every year, not counting college grads) — are not finding jobs. For several years, what's also been driving down the unemployment rate was, not just jobs being created, but also "discouraged workers", who after a time, are no longer considered a part of the labor force (like unemployed workers are) — and are then no longer being counted in the unemployment rate.

As of 2013, in their case to extend jobless benefits for the long-term unemployed, the White House reported that almost 24 million long-term unemployed Americans were out of work at least 6 months and had at one time received extended unemployment benefits since July 2008 — which once provided up to 99 weeks of benefits. How many jobs were created since July 2008 — or better still, how many net new jobs were created since June 2009?

But because federal extended unemployment benefits were never renewed after 2013, millions of more Americans, who are still unemployed, would have still been counted in the unemployment rate today (because to qualify, they would supposedly still be actively looking for work to continue receiving those unemployment benefits) — and they would still be considered a part of the labor force.

So if what the New York Times reports is "good news" (less people receiving benefits, even though they might still be unemployed), then what's the "bad news"?


  1. In 2014, the U.S. Census shows 54.9 percent of Millennials (ages 18-to-24 --- aka "The Boomerang Generation") were living with their parents.

    The Bureau of Labor Statistics reports that as of 2013, of the nearly 3.0 million youths (age 16-to-24) who graduated from high school that year, about 2.0 million (65.9 percent) were enrolled in college.

    (* Every year, they either drop out or graduate — and so, don’t most attempt to enter the labor force?)

    Millennials who participated in the labor force (meaning, they were either working or looking for work):
    34.1 percent of college students (20.2 percent were unemployed)
    42.9 percent of high school dropouts (27.9 percent were unemployed)
    74.2 percent of high school graduates not enrolled in college (30.9 percent were unemployed)
    As of October 2013, 16.8 million persons age 16 to 24 were not enrolled in school. The labor force participation rate of youth not enrolled in school was 77.7 percent — with men more likely to participate.

    (* These statistics were similar in 2012, and most likely would be similar for 2014.)

  2. Washington Post:

    "The cohort of young people unlucky enough to have entered the job market during a time of scarcer [job] openings sees its economic misfortunes (and resulting inability to afford a homestead or other life milestones) persist. In other words, the Great Recession may have led to a new Lost Generation — or at least a Lost Half-Generation."