Jobless claims fall to 3-month low
Seasonal factors make data hard to analyze, officials say
By Rex Nutting, CBS.MarketWatch.com
Last Update: 8:37 AM ET July 17, 2003
WASHINGTON (CBS.MW) - Initial claims for state unemployment benefits fell to a three-month low in the latest week, but Labor Department officials cautioned that seasonal adjustment factors make the data very hard to analyze.
First-time claims over the past four weeks averaged 424,000 a week in the week ending July 12, down 3,500 from the 427,500 in the previous week, the government agency said Thursday. It's the lowest in three months.Initial claims in the most recent week dropped by 29,000 to 412,000.
As a general rule of thumb, initial claims above 400,000 mean job destruction is faster than job creation, economists say. The four-week average for new claims has been above 400,000 for the past 20 weeks.
"This is more a reflection of seasonal factors," a Labor Department spokesman said. Textile and auto plants typically lay off workers in summer months to retool for fall production. The government data "expect" a certain number of layoffs each week based on past history, but statisticians cannot predict which week the layoffs will come.
So what is the deal with the "seasonal adjustments" (SA)? A look at the unadjusted data gives you a bit of a clue:
The advance number of actual initial claims under state programs, unadjusted, totaled 548,603 in the week ending July 12, an increase of 66,182 from the previous week. There were 506,718 initial claims in the comparable week in 2002.The advance unadjusted insured unemployment rate was 2.9 percent during the week ending July 5, an increase of 0.3 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 3,639,783, an increase of 317,630 from the preceding week. A year earlier, the rate was 2.8 percent and the volume was 3,568,069.
Yikes, you say? How could the official "seasonally adjusted" number go down when the actual number of people filling for unemployment for the first time increased?
The "seasonally adjusted" factor is pre-determined, set months in advance of the calendar year, from data and trends from previous years. Since a lot of companies in the past have used July and August to close down factories to do maintenance work, the Department of Labor "adjusts" for that in the factor. For example, in the report's footnotes, Michigan reports 26.5K new claims for "vacation shutdowns in the automobile and automobile related industries." But a new trend also appears in that footnote: New York reported over 10,000 layoffs in education, which it asserted were "seasonal", but which in fact means that due to next year's budget crunch, 10K teachers, administrators and school personnel were given pink slips because their jobs may be eliminated next year.
I was rather surprised, and impressed, to see the Labor Department official admit that the seemingly positive new number should be taken with a grain of salt. Obviously, many of the good old fashioned bureaucrats in the Administration don't have the same problem with exaggeration that some of their superiors do.