EDITOR NOTE: The media is telling us that unemployment numbers are trending in the right direction. They’re pushing a narrative that expanded unemployment benefits are a necessary safety net and not an inducement to stay home. All the while, companies, and especially small businesses are still desperate for more workers. Digging into the numbers, what you see is that when states end expanded unemployment, more people rush back to work. The positive unemployment numbers in July coincide with two of the biggest states, Texas and Florida, ending additional benefits in June. As of now, most big blue states will continue offering these benefits until the federal program ends on September 6. That is the next date to keep an eye on to see whether Congress actually lets the social support programs end or if they try to extend the end date again.
In an economy screaming for labor, the data is becoming clearer, despite breathless media coverage to the contrary.
OK, it’s complicated, as they say, and the weekly unemployment claims data were never designed to be used as precision tracking tool. But it is important. So we’ll take a careful look to get beyond the noise.
Turns out, despite breathless media coverage to the contrary, ending the extra federal $300 a week in unemployment benefits, as over half the states have already done, is indeed encouraging more people to go back to work – in an economy that is screaming for labor.
For the US overall, “insured unemployment” or “continued claims” (number of people having claimed unemployment insurance for more than a week) dropped to 2.88 million in the current week, according to the Department of Labor this morning. It was the lowest since the employment crisis began in March 2020.
At the state-by-state level, “continued claims” can serve as a stand-in to find out if ending the extra $300 a week in federal benefits is encouraging people to go back to work.
To get beyond the noise…
Across the states there are large ups-and-downs from week to week, depending on how claims are processed and reported. But when it happens in the big states, it moves the national needle.
For example, in the reporting week ended July 24, continued claims in California jumped by 16% to 833,426. But in the following week, which was reported today, continued claims plunged by 30% to 577,056. Yet the labor market in California hasn’t changed much over those two weeks. The unevenness of processing and reporting the weekly claims causes this. It’s just noise.
To get beyond the noise, I compare the four-week moving average of “continued claims” among the 27 states that withdrew from the federal unemployment benefits (the Enders) to the “continued claims” among the states that maintained the federal benefits (the Keepers).
The first states that ended the federal unemployment benefits did so in mid-June. Texas and Florida, the biggies, withdrew on June 26. Other states followed in July. Some of the people that lost those federal benefits then got a job, at which point they stopped claiming unemployment benefits.
The typical time lag between starting to look for a job and the first day of work further delays the impact on unemployment benefits. But the first signs likely started cropping up in the “insured unemployment” data sometime after the reporting week through July 3.
The beginnings of a trend.
Since the reporting week of July 3, the 4-week moving average of “continued claims” fell by 10.1% (-107,000 continued claims) among the Enders, while it rose by a tad (+0.03% or +1,000 continued claims) among the Keepers.
In other words, 108,000 more people returned to work in states that ended the federal $300 a week (green) than in states that kept the extra $300 a week (red). Over the past two weeks, “continued claims” among the Enders dropped at a fairly sharp rate of 5.6% and 2.7% week-over-week:
Waiting for September 6.
The extra $300 a week in federal unemployment benefits along with other federal unemployment benefits will end for all states on September 6. And in the labor market, it should become visible over the latter part of September and in October.
Companies that have been clamoring to hire workers are feverishly waiting for these weeks in September to come around when they hope their search for labor to fill job openings will be met with greater interest. And today’s data indicates that many people, once the federal benefits run out, will indeed begin to rejoin the labor force.
Original post from Wolf Street