Jobless Claims and Long Term Unemployment

Two of the most cited economic indicators over the past year have been first time jobless claims and continuing jobless claims. Both have declined by a third since their respective peaks in the spring and summer of last year.

In one five day period in March 2009 674,000 newly unemployed workers filed for compensation. By January 15th the number of new filers had fallen to 482,000. Continuing claims in June were 6.904 millions, by the first week of January they had dropped to 4.617 millions. From these two statistics it would seem that not only are fewer people are being laid off but that many fewer require extended government support. The first assumption is true, the second is false.

Initial and continuing claims are only the two best known of four statistics collected by the Bureau of Labor Statistics (BLS) relating to jobless claims and unemployment insurance. Of the two lesser know figures, extended claims and emergency claims, one, emergency claims, illustrates the long term hold that government unemployment assistance has taken in the work force. When the emergency claims figures are included in the picture of unemployment the image is not one of steady improvement but of rapid and substantial deterioration. More people than ever are unable to leave the government insurance rolls because they cannot find work. The analytical focus on initial and continuing claims has given a false positive reading on the nature of the recovery and the jobs dilemma.

Initial jobless claims record the actual number of people who filed for state unemployment benefits in any week under the joint federal and state program established in 1935. Recipients must meet state requirements that vary with the jurisdiction but fit within Federal guidelines. The programs are jointly funded by the Federal and state governments and administered under local law. Eligibility periods vary from state to state but all are time limited. Before the recession most states restricted the collection to 26 weeks. Under pressure of rising unemployment both levels of government have enacted several extensions of this jobless insurance program.

Continuing claims track the number of people who have received unemployment benefits for at least two weeks. These people remain on the continuing roll until their eligibility period, which stems from the initial filing and as extended by law, has expired. This number has been falling, as noted above, in tandem with initial claims.

However, when unemployment insurance eligibility from that initial claim expires people may qualify for two additional programs that prolong the payment of compensation. These are called by the BLS ‘extended unemployment insurance benefits’ and ‘emergency unemployment compensation benefits’. Eligibility criteria for the three are not identical and the extensions may require a separate application, though generally they do not. The number of people enrolled in the larger of these two programs, emergency benefits, has been rising at a faster rate than the continuing claims and extended benefits rolls have been shrinking.

From the June peak of 6.904 millions continuing claims have dropped by one third to 4.617 millions in the January 1st week, the last for which all three long term benefits have data .Likewise the number of folks receiving extended benefits has slid from 522,000 to 263,000, a 50% improvement. But at the same time the number of recipients of emergency benefits has skyrocketed. In that June week 2.597 million were on the emergency list, by the first week of the New Year that total was 5.655 millions, the highest to date, and more than a doubling in six months.

The total number of workers receiving some type of unemployment compensation under these three programs has gone up by more than half a million in six months, from 10.023 millions in June to 10.535 by January. If one looks a little further back to late March when the three roll total was 8.069 millions, the group of workers needing help has expanded by 2.5 millions, a 30% burst in nine months.

US job destruction may have largely ceased but employment is not improving; it is in fact worsening. Individuals have not left the unemployment rolls and returned to work, they have simply shifted from one statistical category to another as their terms expired, from the continuing claims and extended rolls to the emergency list.

The net job drought is almost complete. Long term unemployment is rising. The longer joblessness remains elevated the more it threatens to create a higher structural unemployment rate. Job skills and even the interest in working deteriorate over time. If the economy does not begin to produce jobs soon then people at the margins of the employment world may become unemployable and permanent wards of the state.

Joseph Trevisani

FX Solutions

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